The uncontrollable political risk associated with the forthcoming 2019 general elections in Nigeria and its negative influence on foreign and local investors have taken tolls on the nation’s stock market and economic activities, as investors are scared away. This has propelled the continued selloffs now hitting hard on Nigeria’s external reserves, at a time oil price broke out its 52-week high at the international market.
Investdata Research reading of the latest data from the Central Bank of Nigeria (CBN) reveals that the nation’s reserves, which had continued to go down in recent months, fell by $1.46 billion, or 3.18% from $45.84 billion in August to $44.38 billion on Thursday, September 27, 2018. Moving in same direction, the composite index and market capitalisation of the Nigerian Stock Exchange (NSE) lost 2,082 basis points and N760.12 billion respectively, or 5.97%. The index closed September at 32,766.37bps, while capitalization stood at N11.96 trillion.
The CBN blames the declining on the evolution of Nigeria’s forex market, which had been influenced by such factors as the changing pattern of international trade, institutional changes in the economy and structural shift in production.
The increasing yield environment in developed market and economics where policies and the business environment are reasonably predictable had earlier put pressure on Emerging Markets like Nigeria.
The tempo of exit from the Nigerian stock market, particularly by foreign investors increased in July as political activities got into top gear and was further heightened immediately after the governorship elections in Ekiti and Osun States. Many saw them as giving insights into what is to come during and after the next year’s general elections. If you notice, investors are very cautious. This may explain why they are not investing at the moment in the real sector, amidst worries that government’s invests in infrastructure projects are not cash-backed.
Oil Price chart movement
The price of crude oil is breaking out today as shown in the chart above. At $74.73/barrel, crude is now at its highest level in nearly four years.
While the five-year chart above looks relatively constructive, an even longer term chart going back to 1990 looks more daunting for oil bulls. For the chart below to turn more bullish from a technical perspective, we’d want to see price move above resistance near $110pb.
The question Nigeria and other oil producing nations should be ruminating over at this time is: Can this recent upward oil price movement be sustained and truly impact positively again in our external reserves, at this time that the nation seeks buyers for its oil shipment to take advantage of the peace in its often restive Niger-Delta region?
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
