Economy quakes under election postponement

While political actors argue over the appropriateness or otherwise of the postponement of the elections earlier scheduled for February 14 and 28, the country’s economy has taken a subtle punching, as the naira has dipped, while investors have been making efforts to recover their funds.
The naira hit an all-time low of 196.30 against the dollar at the interbank segment of the foreign exchange market on Monday following the announcement of the postponement of the general elections by six weeks.
Also same day, investors reacted negatively to the postponement of the general elections by INEC, causing the major market indicators to record their biggest drop in more than one week.
At the close of trading, the Nigerian Stock Exchange All-Share Index and the market capitalisation of the listed equities dipped by 2.08 per cent each.
While the ASI lost 624.53 basis points to close at 29,360.55 basis points, the market capitalisation shed N209bn to close at N9.796tn. Experts attributed the development to INEC’s decision on Saturday to shift the elections.
A review of the performance of the stocks showed that the Banking Index was the worst hit, shedding 5.06 per cent. It was followed by the NSE Consumer Goods Index and the NSE 30 Index, which were down by 3.85 per cent and 2.38 per cent, respectively.
The Industrial Index also declined significantly, losing 2.36 per cent. Only the NSE Oil and Gas Index appreciated on Monday.
The postponement of the elections also cast a shadow on the naira’s outlook, pushing the forex markets into a panic mood, according to analysts.
Foreign exchange dealers and financial analysts told our correspondent on Monday that the poll shift had heightened pressure on the naira as investors became worried over whether the elections would hold or not.
On Friday, the naira closed at 193.90 against the dollar despite an intervention by the Central Bank of Nigeria. The naira had closed at 192.70 to the greenback on Thursday.
“The postponement of the elections was a major blow to the naira. The naira has fallen by this margin because investors are worried over whether the elections would hold or not. In a way, it has heightened the security risk on the country,” said a forex dealer who chose to speak under the condition of anonymity.
According to analysts, if the trend continues, the naira may cross 200 against the dollar at the interbank market. This, they said, would push the value at the parallel market to about 230, up from the current 207.
The naira has been officially pegged at 160-176 to the dollar after an eight per cent devaluation in November. The local currency has, however, traded outside the 160-176 band. This has fuelled speculations that the CBN might devalue it again.

-Ripples

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now