Share dealing on the Nigerian Stock Exchange fell by 40 per cent to N1.15tn ($3.8bn) in 2016, the bourse said on Thursday, as foreign investors sold equities following the rising volatility of the naira and the illiquid foreign exchange market.
The main stock market average fell by 6.2 per cent last year, according to the NSE data. In dollar terms, stocks shed 40 per cent in 2016 as the naira fell by a third in the official market against the dollar due to the Central Bank of Nigeria currency reforms, Reuters analysis showed.
In 2017, stocks have so far fallen a further 3.6 per cent.
On the black market meanwhile, the naira is almost 40 per cent cheaper than the official rate, due to dollar shortages caused by low oil prices.
The stock exchange said foreign investors traded shares valued at N517.55bn in 2016, down from N1.03tn a year earlier, with more than half of the transactions deals to sell shares.
It said domestic transactions accounted for 55 per cent of total share dealing in 2016, compared with the last four years when foreign players dominated the stock market.
In January, the Chief Executive Officer, NSE, Oscar Onyema, acknowledged in his annual briefing the sharp drop in foreign inflows in 2016 and said the outlook for this year would be determined by the CBN’s currency reforms.
Equity investments from portfolio investors and direct investment rose sharply from 2012 to 2014, at a time when Nigeria was one of the fastest growing economies in the world and a top destination for investment.
But a sharp drop in the price of crude oil, the country’s main export, from mid-2014, has since crippled the economy.
The country is battling its first recession in 25 years amid galloping inflation and a weakening currency, which has led foreign investors to flee the financial markets.
The National Bureau of Statistics on Wednesday said total capital imports into the country in 2016 fell to a nine-year low.
Last June, the CBN scrapped its currency peg to allow the naira float to lure back foreign investors but dollar shortages has persisted creating a black market where the greenback trades at a premium.
The NSE snapped a three-session downtrend to close 13 basis points higher owing to gains in the banking sector on Thursday.
The banking sector closed in the green for the first time this week, riding on gains in United Bank of Africa Plc Sterling Bank Plc, Zenith Bank Plc and Guaranty Trust Bank Plc by 2.87 per cent, 1.41 per cent, 1.36 per cent and 0.64 per cent, respectively.