Nigerian banks’ investments fall amid CBN’s mishandling of naira redesign

Nigerian banks lost their appeal as lucrative investment destinations in the capital market this week following the Central Bank of Nigeria’s (CBN) mishandling of the naira redesign policy.

Ripples Nigeria previously reported that banks are being attacked by angry customers who were unable to withdraw their funds deposited in the facilities.

Protests broke out in several states in Nigeria with bank branches in Lagos, Ogun State, Enugu, and Delta State, among others outrightly destroyed by the demonstrators.

The Association of Senior Staff of Banks, Insurance, and Financial Institutions (ASSBIFI) said on Thursday at least 17 bank branches across the country had been attacked by angry protesters.

The association also disclosed that banks had lost N5 billion to the attacks occasioned by the scarcity of naira notes.

The safety of a business is key for investors looking to invest in a company either through equity funding or direct investment.

Therefore for banks, Nigeria is now a hostile environment for business.

Aside the physical attacks experienced from the public, Nigerian banks’ growth prospect has come under threat following vows by state governments to revoke their licenses over the scarcity of naira notes.

This puts the survival of the banks in question, raising a red flag to existing or potential investors who will either exit their investment or shun the banks in the equity market.

How banks are affected

Ripples Nigeria gathered that investors’ confidence is wearing thin, resulting in the Banking Index slumping by –1.34 percent in the Nigerian capital market.

During the week, the Banking Index dipped by 6.05 basis points to close at 446.97 basis points, having opened the week with 453.02 points.

This showed that equity investors had shunned bank stocks for other investable assets in the capital market or reduced their demands for bank stocks.

Consequently, the capital market’s Banking Index fell by –1.34 per cent, depreciating faster than the All-Share Index which dipped by –0.96 percent from 54,327.30 to 53,804.46.

The top five losers

Fidelity Bank was the biggest losers during the week as shareholders lost -14.70 percent of their investment in the firm to investors’ snub.

READ ALSO: Naira crisis: Bank workers peg losses at N5bn, threaten to withdraw services over attacks

As a result, Fidelity Bank’s share plummeted to N4.76kobo after trading closed on Friday. The lender had closed the previous Friday with N5.58kobo per share.

FCMB joined the list as a 6.96 percent value was wiped off shareholders’ investments in five days due to investors’ apathy.

This dragged down FCMB’s share value from N4.60kobo to N4.28kobo during the period.

Zenith Bank was not left out as its shareholders’ investment value fell by –1.96 percent during the week.

The lender ended the week at N25 per share, below the previous N25.5 kobo per share.

Sterling Bank which was accused of hoarding the new Naira notes reported that its shareholders’ investment value dropped by –1.29 percent.

According to trading data, Sterling Bank’s share value dipped from N1.55 kobo to N1.53 kobo per share due to low interest in the firm on Friday.

UBA completed the list as its shareholders went home with –a 0.59 percent loss in their equity investment in the bank.

This was reflected in UBA’s share as low demand led to the firm’s share selling at N8.35kobo at the close of trading on Friday, below the N10.55kobo per share reported last week.

In a chat with an analyst at Cowry Asset Management Limited, Charles Abuede, he said while the attacks might be an indicator of what is to come due to the impact of the attacks on operations, investors’ confidence in banks would pick up in the coming weeks.

He said: “I think the current trend of attacks on banks and their assets are part of some indicators that will tell investors of what’s to come post-elections.

“We do not see the confidence of investors waning due to the recent unrest on banks and their assets. However, the violent act seen so far is likely to have an impact on banking operations and margins.

“Just this week, only the banking index was down almost 2 percent week-on-week as investors react to the attacks as well as the recently released macroeconomic data (inflation).

“This is an upshot from the attendant effect of the policy effect of the CBN and still translates to the existence of a weak transmission mechanism of the apex bank which has left many in fear.

“For us at Cowry Research, I think investors’ sentiments on the banking stocks will improve in the coming week as we await the filings from the tier-1 banks and other early filers in the coming weeks.

“This is expected to drive positive sentiments and boost investors’ confidence across the board.”

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