Nigerian stocks dropped to almost a two-year low on Friday as investors viewed the re-appointment of the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, as a sign that there may be no change to the monetary policy that has kept liquidity tight, traders told Reuters.
President Muhammadu Buhari nominated Emefiele for another term, according to a letter read on the floor of the Senate on Thursday. The upper house of chamber of the National Assembly is expected to confirm the nomination.
The All Share Index dropped by 0.37 per cent to 28,789 basis points, a level not seen since May 2017.
The market capitalisation of equities dropped from N10.860tn on Thursday to N10.842tn on Friday, extending its losing streak to the fifth consecutive day.
Nigerian bonds rallied and the naira currency firmed on Friday.
A trader at the Nigerian unit of an international bank told Reutersthat Emefiele’s re-appointment provided support for a rally that started in the bond market this week, adding that offshore buyers welcomed the re-appointment.
Bond yields, which move inversely to prices, fell across maturities and extended losses on Friday following Emefiele’s nomination.
Local asset managers and insurance companies accounted for much of the bond buying, traders said, with foreigners in the mix.
Analysts, who spoke with Reuters, said Emefiele’s return could be supportive for bonds as investors hunt for yields on the debt market while equity players worry about slow growth, expecting sentiment to remain weak for stocks.
The benchmark 2028 bond yield fell to 14.20 per cent on Friday, down from 14.36 per cent the previous day while the naira, which has been trading tightly firmed to N360 per dollar after the nomination, traders said.