Stocks on the Nigerian Stock Exchange (NSE) rose for a third consecutive day to their highest level in almost nine months as local investors continued to commit to the market.
The NSE All Share index (ASI) jumped 3.1 percent to 31,071.25, its highest close since Sept. 30 2015.
“Volumes in the equity market have gone from about $8 million a day last week to more than $20 million,” Chris Becker, an analyst at Investec, said by phone from Johannesburg. “It’s a big increase, but it’s not all new foreign money coming in. A lot of the rally is down to local money being switched from the bond market to stocks.”
Central Bank of Nigeria Governor Godwin Emefiele announced on June 15 that the naira would be able to trade without restrictions from this week, removing a 16-month peg of 197-199 per dollar. The move came after capital controls needed to defend the measure caused foreign investors to flee and sent the economy, which contracted in the first quarter for the first time since 2004, to the brink of recession.
Yields on local-currency government bonds have risen 40 basis points since the day of Emefiele’s announcement to 14.53 percent, the highest level after Egypt among 34 emerging markets tracked by Bloomberg.
‘Little Liquidity’
There are still few transactions in the foreign-exchange market beyond the dollar sales by the central bank, according to Becker. The monetary authority sold $4 billion in the spot and forward markets to clear a backlog of demand for hard currency on June 20 and about $100 million the following day.
GlaxoSmithKline Consumer Nigeria Plc and Champion Breweries Plc led Thursday’s gains, advancing 10 percent. The banking index rose 2.3 percent for its best close since Oct. 23.
“Foreigners aren’t really coming back yet” into the foreign exchange market, Mickael Avou Ahonzo, head of currency trading at Ecobank Transnational Inc., said by phone from Paris. “They want to take positions. It’s less about the level of the naira than its stability and the liquidity. There’s enough liquidity for small trades, but not really for big transactions.”
