Nigerian Stock Index Posts World’s Biggest Drop on Currency Risk

Nigerian stocks posted the largest decline in the world today as a slumping naira led to a selloff by foreign investors.

The Nigerian Stock Exchange All-Share Index (NGSEINDX) retreated 1.6 percent to 38,767.29 by the close in Lagos, bringing its five-day drop to 4.9 percent, the biggest weekly decline since June. The naira rebounded today after falling a fourth straight day yesterday to a record low.

“All of these things are causing panic,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Ltd., said by phone. “For an international investor, if the currency is going to devaluate, it will affect his own returns.”

Stocks, bonds and currencies from developing nations have been sold after the start of stimulus reduction by the Federal Reserve last month. Equities in Nigeria, Africa’s biggest oil producer, fell 6.5 percent this year, compared with a 4.8 percent decline in the MSCI Emerging Markets Index.

Nigeria’s foreign-currency reserves dropped for a 17th day to $42 billion yesterday. Central bank Deputy Governor Sarah Alade said today the regulator intervened in the market and has enough reserves to keep defending the currency.

“Foreign investors are going risk off,” Yinkere said. “When you consider our own domestic issues where our currency reserves haven’t been growing, there is a sense that the safe position people are taking is that they are anticipating some devaluation of the naira.”

Dangote Cement Plc (DANGCEM), the index’s biggest company by market value, dropped a fourth day, slipping 0.1 percent to 234.70 naira. Guaranty Trust Bank Plc (GUARANTY), the largest lender, fell to the lowest level since Sept. 18, retreating 5 percent to 24.73 naira.

To contact the reporter on this story: Yinka Ibukun in Lagos at yibukun@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.