Investors shun Nigeria’s cheap stocks  – Report

Despite that Nigerian cheap stocks are signalling better returns than less-risky local debt markets, investors are shunning the stocks, wary of a mix of domestic and external threats, according to a report obtained by Financial Street.

Trading on equities on the Nigerian Stock market slumped 57 per cent in June from a year earlier, figures from the bourse show.

According to the report, pension fund managers aren’t favouring the market either – just 4.9 per cent of N10.8tn in retirement savings assets is invested in domestic equities, compared with 5.7 per cent in January and an average permitted ceiling of 15 per cent, according to pensions commission data.

The benchmark Nigerian stock index is heading for an annual decline for the fifth time in the past six years, while transactions on shares by foreign and domestic investors have been in decline.

A dire shortage of dollars and a lack of policy reform are keeping foreign investors on the sidelines.

Locals are avoiding the market, given the poor outlook for the economy because of the Coronavirus Disease and the effect of lower oil prices on the country.

However, Nigerians are also nervous about potential shocks from the naira exchange rate, the Head of Macro Strategy at EFG Hermes Research, Simon Kitchen, said in an August 6 note to clients.

Goldman Sachs Group Inc. said a significant devaluation of the naira was likely in 12 to 18 months to stabilise Nigeria’s external accounts.

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