May even be positive to stocks — Dealers

By Nkiruka Nnorom

LAGOS, NIGERIA – JULY 15: Nigerian Naira, NGN is counted in an exchange office on July 15, 2008 in Lagos, Nigeria. (Photo by Dan Kitwood/Getty Images)

INVESTMENT analysts have said that the move, Friday, by the Central Bank of Nigeria (CBN) to devalue the naira may not have significant impact on the equities market. The market closed positive with investors’ gain at N62 billion on Friday just as CBN moves was happening.

Aside the gains on Wednesday and Friday tradings, the investors had lost N279 billion in the other three trading days last week over worries about the impact of the Coronavirus (COVID-19) outbreak and crash in crude oil prices. The market capitalisation had declined by 2.35 percent to N11.568 trillion from N11.847 trillion.

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Also, the All Share Index (ASI) tumbled by 2.4 percent, falling to 22,198.43 points from 22,734.07 points last week.

David Adonri, Managing Director/CEO, Highcap Securities, said though the devaluation may affect the market negatively, but the impact would not be felt much as the market had previously reacted to the unofficial devaluation.

“The official devaluation may not have any significant negative impact because the Naira had been devalued unofficially in the parallel market long before now, and the market has materially reacted, the reason why the equities have tumbled sharply thus far. So, any reaction that would follow this devaluation is going to be mild, because investors have been shifting from the equities market to fixed income due to the unofficial devaluation.

“The global economy is going into recession and so, there is little or nothing they could do to change the situation,” he said.

However, Victor Chiazor, Managing Director/CEO, FSL Securities, said: “The move is expected to be positive for the equities market because one dollar would buy more units of shares due to the devaluation.

“It would make the capital market more attractive and cheaper than it used to be. So, even at the same price, the more naira in investors’ vault, the more shares they are able to buy. So, the capital market would become cheaper to foreign investors.”

He, however, said that the impact might not be felt much because the Covid-19 is yet to abate and oil prices are still low and so foreign investors may not be comfortable with the market yet. “So, at this current exchange rate, for those that are comfortable, the market would become more attractive and we would begin to see most of them move into the market and mop up shares depending on their risk appetite and how long they think the oil price    is going to remain at the current level,” he added.

Also speaking, Mr. Ayodeji Ebu, Managing Director/CEO, Afrinvest Securities, described the move as a right step in the right direction, but said the adjustment should have been more than this.    “It would send positive signal to foreign investors. It will be positive but because the global crisis following the coronavirus is still very rampant, the impact may not be seriously felt. Beyond the devaluation of the Naira, other global crisis would still be impacting on our economy and the equities market,” he said.

 

Vanguard

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