Investors in the equities market of the Nigerian Stock Exchange lost a total of N287bn on Friday as worsening political tensions and rising interest rates in the United States caused foreign investors to shun assets in Nigeria.
The market capitalisation of listed equities fell below the N13tn mark to N12.941tn from N13.228tn on Thursday.
The NSE All Share Index fell by 2.2 per cent to 35,446.47 basis points at the close of trading, bringing the decline since its 2018 high on January 19 to 21 per cent.
Traders consider a market to be in bear territory when it is down 20 per cent from its last peak.
The rout marks a sharp turnaround from the first few weeks of the year, when the nation’s equities were the best performers in the world.
Despite crude prices rising since then, sentiment towards Nigeria has soured as the dollar strengthens and the US ratchets up a trade dispute with China.
Investors have also been deterred by a political spat playing out before next year’s elections that have seen several lawmakers defect from the ruling party to the main opposition group and the intelligence services blockading parliament.
“People are just waiting until the election is over before investing in Nigeria,” Paul Clark, a money manager in Johannesburg at Rand Merchant Bank’s Ashburton Investments, told Bloomberg.
“The economy isn’t doing too badly and the companies aren’t doing too badly. But the downturn is a function of general riskier sentiment. We won’t see any new investors coming into the market as we move towards the elections.”
While stock markets in countries such as China and Brazil have fallen into bear territory this year, Nigeria’s is the first major bourse in Africa to do so. Egypt’s is in a technical correction, meaning it’s down more than 10 per cent from a recent peak.
Dangote Cement Plc, Africa’s biggest producer of the building material, dragged down stocks the most on Friday, declining 6.1 per cent to N214, bringing its losses this year to seven per cent. The overall index is down 7.3 per cent in 2018.
“We have a political climate that is unfolding,” the Head of Strategy, Securities and Exchange Commission, Mo Omamegbe, said in an interview in Lagos.
He said, “That political climate is uncertain. You can’t do anything about it. The hope is that the rhetoric on both sides of the political spectrum is such that there are no unwanted effects on the market.”