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Home Business News Politics

Why this CBN Deputy Governor believes devaluation won’t affect prices of Nigerian stocks

Nairametrics by Nairametrics
March 16, 2015
in Politics
Official:  The CBN Will Approve Your Employment Letter Before You Join Any Bank
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The Nigerian stock exchange has been on a tailspin since the end of October 2014 with most stocks hitting multiple year lows. Many analysts and investors attribute this to the twin impact of the fall in oil prices as well as the depreciation of the naira. However, the Central Bank of Nigeria (CBN) Deputy Governor, Financial System Stability, Dr. Joseph Nnanna believes the devaluation of the naira could not impact negatively on the profitability of the market.

An article from Thisday reports he was speaking to journalists in Abuja shortly after interacting with students of the Government Secondary School, Garki, to mark the 2015 School Mentoring Programme, which is part of activities for Global Money Week. Here is the first reason he gave

“Our stocks are denominated in naira, they are priced in naira, our stock market can only be affected by the profitability of the companies which are quoted in the stock exchange. But so far, we don’t see any evidence that some of the companies quoted there, their profit margin or bottom line is declining. So that’s why I am saying that the stability of the Naira or otherwise won’t affect the price of the shares.”

As one would expect, he was asked if the importation of raw materials which some companies rely on for production would not be affected by fluctuation in the exchange rate, he said:

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 “The point here is that we talk about costs, we don’t talk about returns. The companies that import things from abroad cannot continue to be in business if their returns on investment is not high enough.

“So breweries are local brands, the star beer you drink are produced with almost ninety-five per cent local materials, cement by Dangote has ninety-five percent local raw materials and many others. This economy has been diversified from what you see from the GDP. We have N510 billion GDP and services, manufacturing, agriculture now account for the greatest share.”

How stocks performed after devaluation?

Well, we can only confirm his assertion by checking how stocks have performed since the CBN devalued the naira on November 25th 2014. The day after November 26th, the market closed higher gaining 1.3% and followed that up with another 0.35% gain. However, as the news reverberated amidst growing investor concerns, the Nigerian All Share Index went on a 14 day of sell offs losing in all but one day.

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Tags: Consumer GoodsNews ReviewOil & Gasoil price

Comments 2

  1. Syca says:
    March 16, 2015 at 2:54 pm

    There is no way this man is a Deputy Governor of the CBN if he really said this!

    Reply
  2. Ahmed says:
    March 17, 2015 at 12:13 pm

    He is merely a secondary school economics teacher that becomes CBN Governor by accident. He is lost in the theory of elementary economics he teaches secondary school students.

    Reply

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