In what both the Central Bank of Nigeria (CBN) and the Federal Government may point to as a sign of its foreign exchange policies working, the Nigerian Stock Exchange (NSE) was the best performing among the top 16 global stock exchanges in June 2017.

The NSE All Share Index was up 12.2% in June. The least performing exchange was the CAC 40 index of France which lost 3.08% Month on Month.

Factors that led to the positive returns

Some of the factors that led to the positive returns were introduction of the Investors and exporters Window, increase in crude oil prices and production volumes. Production volumes have gone up due to a break in militant attacks on oil facilities and resumption of oil exports from the Forcados terminal.

The Investor window, launched by the CBN also created an avenue for buyers and sellers of forex to exchange at a market determined price under guiding rules. The new window has gained traction lately as investors sentiments towards it improved from skepticism to comfort.

Will this be sustained?  

Research has shown that the NSE All Share Index tends to move in tandem with crude oil prices. A fall in either crude oil prices or a drop in production volumes could lead to a decline in the stock market. Should either of those events happen, the CBN could decide to resume a tight fx management policy, which could make foreign investors exit the stock market.

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