Delayed Election Compounds Misery for Stocks and Naira

It looks like it’s going to get worse for investors in Nigeria before it gets any better.
The country’s stock index is the worst performer in the world after Ukraine, while its currency has declined 17 percent in the past six months to an all-time low. Both, along with government bonds, are set to weaken more after Nigeria delayed elections, according to banks and brokers including Renaissance Capital and Standard Chartered Plc.
“We are going to see the market react in a negative way,” Bismarck Rewane, chief executive officer of Financial Derivatives Co., a financial advice company in Lagos, said from the city on Sunday. “The economic uncertainty of the country has increased. By extending the uncertainty, investors who were waiting for the outcome of the election will not come back.”
Nigeria’s electoral commission said at the weekend the presidential and parliamentary election scheduled for February 14 will be put back to March 28 because of attacks by the Islamist Boko Haram group. Government opponents said the move will give President Goodluck Jonathan an extra six weeks to rally support that has been dwindling as a collapse in the price of oil hits the revenue of Africa’s biggest crude exporter.
The value of the 195-member Nigerian Stock Exchange All Share Index, which reached a peak of more than N13 trillion ($67 billion) last year, tumbled to N9.4 trillion on February 6 as crude prices plunged more than 50 percent since June. The index is down 41 percent over the past six months in dollar terms, more than Greece.

Naira Slump
The naira has slumped 12 percent against the dollar on the interbank market in the past three months, the most among 24 African countries tracked by Bloomberg. It fell 3.4 percent in the week to Feb. 6, extending declines to a record.
“We had expected that after companies release their full-year results in March and the election is over, some stocks will begin to recover,” Ayodeji Ebo, head of research at Afrinvest West Africa Ltd. in Lagos, said by phone. “The postponement has extended the market uncertainties.”
Support for Jonathan, 57, and his People’s Democratic Party is declining as his administration battles an increasingly powerful Islamist Boko Haram insurgency, making the presidential election the closest since the return to democracy in 1999.
Jonathan has been in power since 2010 after first taking the post following the death of his predecessor and then winning an election a year later.
Boko Haram, which seeks to impose Islamic law in Africa’s biggest economy, killed more than 4,700 people last year, twice the number who died in 2013, according to estimates from U.K.- based risk consultancy Verisk Maplecroft.

Neck and Neck
Jonathan and All Progressives Congress candidate Muhammadu Buhari, the main challenger, are tied at 42 percent among likely voters, the highest level recorded for an opposition candidate since 2000, according to Jan. 27 report by Afrobarometer, a research group funded by the Mo Ibrahim Foundation and the U.S. Agency for International Development, among others.
The poll of 2,400 adults conducted in December had a margin of error of plus or minus two percentage points.
“The market is likely to remain in a risk-aversion mode this week,” Samir Gadio, the London-based head of Africa strategy at Standard Chartered Plc, said by e-mail.
There’s also a question of managing the economy. Finance Minister Ngozi Okonjo-Iweala in December proposed cutting this year’s budget by eight percent and reduced its benchmark oil price to $65 a barrel from last year’s $77.50 because of tumbling crude prices. Lawmakers are still considering the proposals.
“At the macroeconomic level, things will remain at a standstill as lawmakers engaged in politics may not be able to pass the 2015 budget,” Ebo said. “Even the president will have little time to run the economy.”

Leave a Reply

Your email address will not be published. Required fields are marked *