Investors Shun Cheap Stocks In Nigeria – Report

Nigerian stocks are signalling better returns than less-risky local debt markets, where rates are at the lowest in a decade.

Yet investors are shunning the opportunity, wary of a mix of domestic and external threats, according to Bloomberg.

Trading in equities on the Nigerian Stock Exchange slumped 57 per cent in June from a year earlier, figures from the bourse show.

According to the report, pension fund managers aren’t favouring the market either: just 4.9 per cent of N10.8tn ($28bn) in retirement savings assets is invested in domestic equities, compared with 5.7 per cent in January and an average permitted ceiling of 15 per cent, according to pensions commission data.

The benchmark Nigerian stock index is heading for an annual decline for the fifth time in the past six years.

Transactions in Nigerian shares by both foreign and domestic investors have been in decline.

A dire shortage of dollars and a lack of policy reform is keeping foreign investors on the sidelines.

Locals are avoiding the market given the poor outlook for the economy because of the COVID-19 pandemic and the effect of lower oil prices on the country.

Nigerians are also nervous about potential shocks from the naira exchange rate, the Head of Macro Strategy at EFG Hermes Research, Simon Kitchen, said in an August 6 note to clients.

Goldman Sachs Group Inc. this week said a significant devaluation of the naira is likely in 12 to 18 months to stabilise Nigeria’s external accounts.