Foreign
investors fleeing Nigeria as oil prices plunge are leaving stocks undervalued
in Africa’s biggest economy, the bourse’s chief executive officer, Mr. Oscar
Onyema has said.
The
benchmark index’s 18 per cent decline this year isn’t justified by economic
changes and as a result Nigerian equities are “effectively on sale,” Oscar
Onyema said in an interview with Bloomberg in Diani, Kenya.
“The
fundamentals demand higher valuations.”
Nigerian
stocks dropped as crude slid into a
bear market and the central bank eroded
reserves to support the currency, which fell to a record low this month.
Nigeria
is Africa’s biggest oil producer, and its $520 billion economy is forecast to
grow 6.5 per cent this year and next, according to a Bloomberg survey of
economists.
“The
local institutional investors are net buyers at the moment,” Onyema said,
adding that “they are buying and their way of looking at it is that the prices
we’re seeing today are not justified by the fundamentals.”
The
Nigeria Stock Exchange (NSE) All Share Index closed at 34,111.85 basis points
yesterday, while the NSE market capitalisation closed at N11.263 trillion. In
addition, as 19 shares increased, six fell and 170 were unchanged.
PZ
Cussons Nigeria Plc, a soap maker, was the bigger gainer, climbing 4.9 percent.
Foreigners
will probably remain wary of the Nigerian market until presidential elections
in February, Onyema said.
There
is pent-up demand for stocks, though investors won’t commit funds until they
have clarity on policy and security under the new administration, he said.
An
Islamist insurgency in northern Nigeria and a campaign for the presidency
pitting candidates from the mainly Muslim north against an incumbent from the
largely Christian south point to “a very perilous contest whose results may
also be disputed,” the Brussels-based International Crisis Group said in a
report last week.
“We’re
in a political cycle right now and foreign investors want to see what the
outcome is,” Onyema added.
“They
want to get certainty about the security situation and they also want to see
the package of measures that the fiscal and monetary authorities will take in
addressing the shocks that we’ve seen.”
The
naira had weakened to a record low of N178 to a dollar this month because of
the collapse in the price of oil, which accounts for more than two-thirds of
government revenue.
The
Central Bank of Nigeria (CBN) yesterday devalued the naira by moving the midpoint
from N155 to a dollar to N168 to a dollar. It also widened the band around the
midpoint by 200 basis point from + or – 3 per cent to + or -5 per cent.
Similarly, it increased the monetary policy rate (MPR) from 12 per cent to 13
per cent and also raised private sector cash reserve ratio (CRR) from 15 per
cent to 20 per cent.
“When
you look at OPEC countries, they’re all feeling the sweat, but Nigeria tends to
be more pronounced, because of some of the perceived weaknesses in our buffers
such as the level of foreign reserves and the ability of the central bank to
defend the currency,” Onyema said.
“I
have confidence in the central bank’s ability to provide a currency that has
stability.”
Onyema
said the NSE is seeking to boost listings and talking to so-called marginal oil
field operators eager to match the success of Seplat Petroleum Development
Company’s initial public offering in April, Nigeria’s first since 2008.
“The
marginal field operators have a real opportunity to participate in our market,
especially given the success that Seplat has shown,” Onyema said.
Marginal
field operators in Nigeria include Bayelsa Oil Company, Platform Petroleum
Limited and Sahara Energy Field Limited.
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