As Nigeria’s equity dip continues, domestic officials have blamed the wider world, as well as the nationalisation of three of the country’s banks
The Nigerian stock exchange has experienced further difficulties as equity value continues to fall.
The value of equities has seen a reduction of 22 percent between February 2011 and February 2012 – which is well over 1.8 trillion Naira. However, while these figures seem alarming, regulators remain optimistic that the situation will turn around over the course of the year and that Nigerian equities market will experience a level of growth.
Some of the losses in the Nigerian stock market can be attributed to the lack of investors’ confidence as a result of domestic problems. Developments such as the nationalisation of three of the country’s major banks and the continual review and adjustment of interest rates have caused investors to become uncertain about the future of the stock market and disinclined to invest. Investors who would normally invest their money in shares in order to achieve a profit over the short-term are particularly reluctant to invest in the current economic climate.
The international banking crisis has had an impact on Nigeria, leading to commercial banks becoming nationalised. The money market’s high interest rates have created further problems for the Nigerian economy.
Arunma Oteh, the Director-General of the Securities and Exchange Commission in Nigeria, feels that Nigeria is experiencing the same difficulties as many other countries, and while the country has sustained a significant amount of financial loss in the last year, there are a number of other countries that have been hit harder. She also pointed out that while some causes of Nigeria’s recent equity dip can be linked to strictly financial causes, political uncertainty at home and in other areas such as the Middle East has also played a part. According to This Day Live, Oteh has been quoted as attributing Nigeria’s recent difficulties to “the fragile global economy, especially the downgrade of the United States credit rating and the eurozone debt crises; the banking crisis, which led to the nationalisation of three Nigerian banks; post-election security concerns; investor apathy and the political crisis in Cote d’Ivoire and some Middle East and North African (MENA) countries”.
Although some Nigerian regulators remain hopeful that the stock market will recover much of their losses over the course of 2012, investors in Nigeria and other countries remain cautious and are still reluctant to invest in Nigerian stocks in the immediate future. As is the case for many countries in the current financial climate, lack of confidence is playing a large part in Nigeria’s economy and the future still remains uncertain.