Nigeria’s Saturday February 7th announcement postponing its general elections has intensified investor anxiety. Nigerian equities reportedly lost $1.04 billion on Monday February 9 2015, with similar losses on the following day.
The market opened with an average year-to-date return of -13.48 percent. Before the shift in election dates, the market had sustained an appreciable rally to close the week with an average week-on-week gain of 1.43 percent. According to a report by the business analysis website Nairametrics, Nigerian equities lost N208 billion ($1.04 billion) the first trading day after the elections announcement. Monday’s stock market rout has investors worried that the six week poll delay will cause further losses.
“The whole world is watching Nigeria closely particularly rating agencies which foreign investors rely on to price risk. As expected most fund managers are pulling out of equities, perhaps buttressing why there is so much pressure on the Naira at the interbank,” Ugodre Obi-Chukwu, owner of Nairametrics told Ventures Africa on Thursday. “Recently S&P threatened to downgrade Nigeria[’s] risk rating further if politicians continue to heat up the polity.”
Ugodre attributed the current volatility in the market to three major forces; elections, exchange rate and the drop in oil prices, adding that the market has lost over $2 billion since the postponement was announced. That is almost half the $4.5 billion the stock exchange lost in 2014. The downward pressure on equities may continue until the election of a new government.
The presidential and national assembly elections, originally scheduled for Saturday February 14th will now take place on March 28th 2015. The gubernatorial and state houses of assembly elections which were scheduled for February 28th have been moved to March 11th 2015.
Proshare Nigeria, a firm that analyses Nigerian financial commented on the effects of the six week delay in a report released on February 11th ” […] we see a further downward revision on 2015 growth output on the back of the postponement. In opinion the postponement will further add to the risk premium on Nigerian asset class,” Proshare stated.