Nigerian Stocks Drop to End 10-Day Rally as Vote Euphoria Fades

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Nigerian stocks declined, ending the longest rally in 2 1/2 years, as optimism over peaceful elections faded to focus on challenges facing the economy amid lower oil prices.

The Nigerian Stock Exchange All Share Index dropped the most since March 16 on Tuesday. Ten straight days of gains had pushed the gauge above the threshold that signaled to some investors an asset is overbought. The measure rallied 15 percent in the four days after the March 28-29 vote to erase losses for 2015 as President Goodluck Jonathan conceded defeat to Muhammadu Buhari, mitigating the risk of violence in Africa’s biggest economy.

“Some of the headwinds in the economy are still there,” Thabo Ncalo, a money manager at Stanlib Asset Management Ltd., which oversees about $45 billion, said by phone from Johannesburg. “Now that we’ve had the good news, everyone is sitting down and looking at valuations.”

The challenges Buhari, 72, will inherit when he’s inaugurated on May 29 include slowing growth, falling oil prices and continued Islamist terrorism. Crude, the nation’s main export and biggest source of government revenue, has dropped almost 50 percent since June. The International Monetary Fund estimates economic growth will slow this year to 4.8 percent from 6.1 percent in 2014. In the north, the Islamist militant group Boko Haram has waged a six-year insurgency that the government said has killed more than 13,000 people.

Overbought Signal

The All Share Index declined 2.2 percent to 34,941.79 by the close in Lagos, the commercial capital, as 42 stocks retreated, 20 rose and 119 were unchanged. The gauge’s 14-day relative-strength index, which rose to the highest since February 2013 on April 2, decreased to 75.6 on Tuesday. A level above 70 typically indicates to technical analysts that an asset's move is overdone.

Seplat Petroleum Development Co. led declines, retreating 9.8 percent to 400.71 naira as prices for Brent crude decreased 1.1 percent to $57.45 a barrel. Guaranty Trust Bank Plc, the country’s biggest lender, also retreated, falling 9.7 percent to 28.79 naira.

The economy is also facing a weaker currency, with the naira down more than 17 percent against the dollar in the past six months. The currency faces the prospect of a selloff when the central bank of Africa’s biggest oil producer removes trading restrictions imposed last year to reduce volatility.

The naira was unchanged at 199.05 per dollar. Yields on $500 million of Nigerian bonds due July 2023 fell six basis points to 6 percent, the lowest on a closing basis since Dec. 8.

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