Nigerian stocks dropped, overtaking Zimbabwe as Africa’s worst performer this year, as sliding oil prices weaken the nation’s ability to defend its currency at a record low, reports Bloomberg.
The Nigerian Stock Exchange All Share Index fell for a 10th day, bringing losses in 2014 to 13 percent, the most of 14 African gauges monitored by Bloomberg. Zimbabwe’s benchmark gauge is down 11.7 percent. The currency of Africa’s largest producer of oil declined a fourth day as OPEC members’ average crude price fell below $80 for the first time in four years.
Nigeria, which relies on the commodity for 80 percent of government revenue, has run foreign-exchange reserves to a three-month low in a bid to defend the naira, avoid raising interest rates or devaluing the currency before elections in February. The NSE All Share Index’s 50-day moving average fell below the 200-day line on October 31, a technical indicator that may be bearish for the gauge.
The central bank “remains intent on managing the exchange-rate situation without needing to hike rates or devalue the currency,” Gareth Brickman and Catherine Bennett, analysts at Johannesburg-based ETM Analytics, said in an e-mailed note. “Current trends still show the outlook to be pressuring away its room for maneuver.”
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A falling currency deters foreign investors from holding Nigerian assets, while boosting the cost of importing everything from fuel to food, threatening support for President Goodluck Jonathan, who’s already under pressure for failing to stem deadly attacks by Islamist militants.
