The losses recorded by many stocks listed on the Nigerian Stock Exchange in the last three days of trading have wiped out a total of N780bn in investor wealth.
The NSE All-Share Index fell by 2.45 per cent to close at 32,233.80 basis points on Friday, while the market capitalisation of listed equities dropped to ₦11.107tn from ₦11.386tn on Thursday.
The market capitalisation, which stood at ₦11.887tn on Tuesday, plunged to ₦11.576tn on Wednesday.
Stocks had been gaining since late April on the back of the currency moves by the Central Bank of Nigeria.
On April 21, the CBN established a forex widow for investors and exporters to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.
The market capitalisation of listed equities on the NSE stood at ₦8.716tn on April 21, down from a peak of ₦12.135tn on April 2, 2015.
As of last Tuesday, the nation’s stock market gained over ₦3tn, some of which has, however, been pared by sell-offs by investors.
The Acting Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, attributed the decline in the market to half-year activities by domestic investors.
He said, “For most of the domestic investors, portfolio managers, fund managers, when you compare the performance of the market relative to the end of March, all the shares in their portfolio would have appreciated significantly.
“And for them to be able to realise their income, they need to sell. So, for some of them, it just makes sense that they realise their profits and come in again in July.”
According to Ebo, the Etisalat loan saga may have triggered the sell-off of banking stocks.
“I think people were trying to be cautious in terms of the impact of the loan on the banks involved. But based on analysis, it is not going to be very significant. We expect that even before the end of the year, something will be done such that we can’t say the loan has gone totally bad,” he said.
He also said the downward trend in the market might continue up until the end of the month.
Banking shares have been spooked after talks between a group of lenders and the telecoms firm, Etisalat Nigeria, over a debt renegotiation collapsed.
United Bank for Africa Plc, which led 33 losers on Friday, was among the 10 banking stocks that suffered losses. Fifteen banking stocks recorded price depreciation on Thursday.
The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, attributed the recent bullish trend in the stock market to improved forex policy and positive market sentiments.
He noted that there had been improved investment and corporate earnings due to the improved macro economy.
He said foreign investments into Nigeria grew year-on-year for the first time in the first quarter of this year after nine consecutive quarters of decline.
Rewane noted that the equity market was by far the biggest destination of portfolio investments, which had picked up recently due to fixed income market.
He noted that market capitalisation closed at ₦10.4tn in the month of May, representing an 11 per cent increase from ₦8.8tn with a gain of ₦1.2tn.
On the future of the investments, Rewane had earlier in the month said, “Market capitalisation may reach ₦12.5tn by the third quarter of 2017. Portfolio investment inflows into the equity market are expected to increase in the long term as currency stabilises.”
But the market sentiment weakened last week amid the possibility that the MSCI Inc, a global index provider, would downgrade Nigeria later in the year.
Last week, the MSCI deferred its decision on the reclassification of Nigeria index till November.
It said the decision on the potential removal of the MSCI Nigeria Index from the MSCI Frontier Markets Index had been delayed to November to allow more time for international institutional investors to better access the effectiveness of the new forex trading window introduced by the CBN.
Nigeria, which is struggling to restore investor confidence in its currency, has seen its benchmark stock index lose more than 30 per cent in dollar terms over the past 12 months.