The Nigerian Stock Exchange closed trading on the last day of May with a massive 4.26% loss to record its biggest one day loss in over a year. Market capitalization from by about N425 billion in just one day. Traders hit the sell button from the opening of trading at about 10.30am as investors fell over each other to dump stocks.
Nigerian All Share Index closed the month with a year to date loss of 3.39% and a one year loss of 19.3%. The month of May however, closed positively with a again of 10.37%.
A cross section of traders attribute the massive sale to profit taking as investors who had bought in on the bullish ride in the past week thought it best to sell off as uncertainty continued to cloud over the economy. Others however felt the sell-off was mainly due to the mixed vibes sent out by the President insisting that he thought the Nigeria economy needed a strong currency. This contradicted comments by him that he was now favorably disposed to the “new” flexible exchange rate policy announced by the government.
Vibe 1
“We resolved to keep the Naira steady, as in the past, devaluation had done dreadful harm to the Nigerian economy,”
Vibe 2
“Furthermore, I supported the monetary authority’s decision to ensure alignment between monetary policy and fiscal policy. We shall keep a close look on how the recent measures affect the Naira and the economy. But we cannot get away from the fact that a strong currency is predicated on a strong economy,”
Vibe 3
“In respect of the economy, I would like to directly address you on the very painful but inevitable decisions we had to make in the last few weeks specifically on the pump price of fuel and the more flexible exchange rate policy announced by the central bank. It is even more painful for me that a major producer of crude oil with four refineries that once exported refined products is today having to import all of its domestic needs.”
The Buhari Government is notoriously renowned for its delay in announcing policies and even when policies are announced, there are further delays in implementing them. The Government is also known to flipflop on policy pronouncement suggesting that they might make a u-turn should the price of oil rise again in the next few days.
Analysts also believe that the economy is still in a tailspin further buttressed by the spate of macro-economic data reeled out by the National Bureau of Statistics on in the past few days. On Tuesday, the NBS reported that Nigeria recorded its first negative Balance of Trade since data collection began in 2008, a further reaffirmation that the economy was still near comatose. This was preceded by a negative GDP Growth of -0.3% leading many analysts to predict an imminent recession.
The sell-offs is also likely to continue this week except the CBN intervenes by revealing further details about its new forex policy.
