Investors Dumps Shares, Pressure On Naira As Market Reacts To Election Shift

Nigeria's financial markets responded to the news of election postponement on Monday with the local currency taking a hit on the forward market while investors dumping their shares on the local bourse as uncertainty over the general election deepen.

The equity market declined to a week low at early trade while naira weakened on the forward market by one percent.

Nigeria’s Eurobond yields also rose on Monday.

The rise in government bond yields — yields move inverse to a bond’s price — was more pronounced in longer-dated, dollar-denominated bonds such the 2027 and 2032 issues.

The Independent National Electoral Commission (INEC) early on Saturday morning short before poll expected to open said the elections were postponed for one week solely for logistical reasons and denied political pressure had played any part. 

The one-year non-deliverable naira forward opened at a quote of 401 per dollar, compared with 397 in the previous session.

“There is some frustration on behalf of investors who have had concerns about this election for the better part of the past year and are ultimately hoping to simply put it behind them,” said Christopher Dielmann, senior economist at Exotix Capital
Investors had started to pick up shares to position for a post-election rally, assuming that the election would pass without violence or other problems. That boosted dollar liquidity on the currency market.

Stocks, which had climbed past a three-month high on Friday, shed 1.8 percent to 32,126 points on Monday.
Analysts say the delay could lead to a contested result, creating uncertainty,
“Some investors might still want to wait for the results of the election to gauge risks, such as a possible contestation of the result, which the postponing arguably now has given more grounds for,” said Cobus de Hart, senior economist at South Africa’s NKC African Economics.