Share dealing on Nigeria’s bourse dropped 40 percent to 1.15 trillion naira ($3.8 billion) in 2016, the stock exchange said on Thursday, as foreign investors unnerved by the country’s illiquid currency markets sold equities. Nigeria’s main stock market average fell 6.2 percent last year. In dollar terms, stocks shed 40 percent in 2016 as the naira fell by a third in the official market against the dollar due to central bank currency reforms. In 2017, stocks have so far fallen a further 3.6 percent.
On the black market meanwhile, the naira is almost 40 percent cheaper than the official rate, due to dollar shortages caused by low oil prices. The stock exchange said foreign investors traded shares valued at 517.55 billion naira in 2016, down from 1.03 trillion naira a year earlier, with more than half of the transactions deals to sell shares.
It said domestic transactions accounted for 55 percent of total share dealing in 2016, compared with the last four years when foreign players dominated the stock market. In January, stock exchange chief executive Oscar Onyema acknowledged in his annual briefing the sharp drop in foreign inflows in 2016 and said the outlook for this year will be determined by the central bank’s currency reforms.
Equity investments from portfolio investors and direct investment rose sharply from 2012 to 2014, at a time when Nigeria was one of the fastest growing economies in the world and a top destination for investment. But a sharp drop in the price of crude oil, Nigeria’s main export, from mid-2014, has since crippled the economy. Africa’s biggest economy is battling its first recession in 25 years amidst galloping inflation and a weakening currency, which has led foreign investors to flee its financial markets.
The government’s statistics office on Wednesday said total capital imports into Nigeria in 2016 fell to a nine-year low. Last June, the central bank scrapped its currency peg to allow the naira float to lure back foreign investors but dollar shortages has persisted creating a black market where the greenback trades at a premium. ($1 = 304.20 naira)