Investors in the Nigerian equity market sold off most of their shares, on Monday, causing the market to decline by 1.08%, even as the NSE All Share Index dropped down to 28, 533.40 points. This represents a 3-week low.
As it turns out, the bearish sentiment was caused by the Coronavirus which has continued to threaten the Chinese economy. Reuters reported that equity investors on the NSE are afraid that the virus threat could eventually affect Chinese demand for various goods, including raw materials like crude, which Nigeria sells to the country.
Note that China is Nigeria’s major partner, buying a significant portion of the West African country’s crude output which it uses to power its many industries.
The Nigerian economy depends mostly on revenues realized from oil sales to countries such as China. What this means, therefore, is that the Nigerian economy could face serious troubles if Chinese demand for Nigerian crude drops.
Already, the Nigerian economy has faced various challenges, including revenue shortage due to lower oil revenue, high inflation rate, depleting foreign reserves, and even a possible devaluation of the naira. As you can expect, some of these indicators have mostly affected the stock market negatively, especially in 2019. As Nairametrics reported, the NSE All-Share Index ended the year with a 14.6% loss.
However, in early 2020, the Nigerian stock market began to pick up with hopes of better performance. Analysts attributed this to higher oil prices which led to an inflow of revenue into the country, thereby encouraging local equity investors to channel money into buying shares.
Unfortunately, as the fear rise Chinese demand for Nigerian crude could decline due to the Coronavirus, many investors are worried about what this could mean to their shareholding, hence the sell-offs. There is also the worry over what possible [negative] implications the US ban on Nigerian immigration could have on the Nigerian economy.