•Naira tumbles, nears N2,000/£1 at parallel market
By Chinwendu Obienyi
Although the Nigeria Labour Congress (NLC) has agreed to suspend its indefinite nationwide strike for a week, there are concerns from economic analysts about its impact on the nation’s financial markets even as the outlook for the naira as well as activities in the stock market remains pessimistic.
This is coming after Africa’s second largest economy lost about N141 billion worth of investments in the equities market owing to the heightened tensions between the federal government and the organised labour over the recent hike in electricity tariff and failed new minimum wage agreement with the government.
According to data obtained from the Nigerian Exchange Limited (NGX)’s website, transactions at the domestic bourse encountered suppressions upon the commencement of trading in the new trading week (for the month of June) as the total number of deals, volume and value of stock transactions plummeted by 5.20 per cent, 19.45 per cent and 38.92 per cent respectively.
Consequently, market capitalisation which had opened the new trading month at N56.172 trillion, fell to N56.069 trillion, representing a N103 billion loss. The sentiment continued unabated yesterday, with the value of listed equities depreciating further by N38 billion, which meant that investors have lost about N141 billion in two consecutive trading sessions.
Furthermore, the naira is currently languishing against the British pound near the N2000/£1 support line, owing to the fortunes of the British currency which has gained momentum in global FX markets.
Despite better market circumstances in the nation’s official market, the British pound sterling sold for N1,861 and N1,875 against the naira at the parallel market on Monday and Tuesday, respectively. According to market analysts, this was partially caused by the sNLC’s industrial action which resulted in increased speculation, hoarding, and the delayed payment of foreign exchange to Bureau de Change operators.
According to analysts at Rand Merchant Bank (RMB), exchange rate volatility remains a key concern for investors. They said, “Liquidity in Nigeria’s foreign exchange market has dipped as the instability in the exchange rate and unrelenting inflation rate spooks foreign investors.”
Analysts at Cordros Research said, “Naira’s outlook remains bleak with further depreciation anticipated in the short term. Despite strategic interventions by the CBN and improved inflows from foreign portfolio investors, the underlying demand pressures and market dynamics suggest that the naira will continue to face challenges. Domestic investors are likely to focus on equities, seeking stability and potential gains amid the currency’s volatility.”
