Political fears leads to massive losses on Nigeria’s Stock Exchange

The Nigerian Stock Exchange has continued to witness massive sell offs and yesterday saw its biggest loss of N423 billion in eight months. Many are however of the view that the losses are due to heightened political risk as the 2019 general elections gets closer.

A total of 37 stocks declined compared with only 10 that appreciated. The price losers were dominated by heavy weights such as Dangote Cement Plc, Nigerian Breweries Plc, Zenith Bank Plc, FBN Holdings Plc and Stanbic IBTC Holdings Plc.

However, Universal Insurance Plc led the price losers with 10 per cent, trailed by Cement Company of Northern Nigeria Plc with 9.8 per cent. On the positive side, Law Union & Rock Insurance Plc led the price gainers with 9.0 per cent, followed by Skye Bank Plc with 8.9 per cent.

From every indication, investors are ignoring strong fundamentals of some of the stocks and continued to exit due to their apprehension over the current political situation.

Analysts at Afrinvest (W.A) have made some stocks in the banking, consumer goods and industrial goods sectors to be attractive. In the banking sector, for instance, the said United Bank for Africa Plc has upside potential of 56 per cent and Zenith Bank Plc 52 per cent. GTBank Plc has 27 per cent growth potential, while Access Bank Plc has 11.3 per cent.

In consumer goods sector, the analysts said UAC of Nigeria Plc has upside potential of 122 per cent; Nigerian Breweries Plc has the potential to gain 60 per cent; PZ Cussons Nigeria Plc 48.5 per cent and Flour Mills of Nigeria Plc 29.9 per cent. In the industrial goods sector, Lafarge Africa Plc can rise by 158 per cent and Dangote Cement Plc 28.5 per cent.

In a related vein, the Association of Stockbroking Houses of Nigeria (ASHON) in a recent letter signed by the General Secretary, Sam Onuokwe, stated categorically that the political tension and uncertainties witnessed in the country is currently affecting investors’ sentiments, asset valuations, and portfolio allocation decisions.

According to the group, foreign portfolio investors and their indigenous counterparts have embarked on massive sell down of shares and other financial instruments despite improved performances of many listed securities.

It, therefore, urged the political class to moderate their activities and utterances by acting in such a manner that will boost investors’ confidence and grow the economy.

The association suggested that the political class rather than indulge in unwholesome activities and destructive utterances, should support all efforts aimed at creating the much-needed enabling environment for accelerated economic growth and development.

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