Nigerian stocks rose
their most in more than one month on Monday to the highest since
mid-March as the completion of presidential elections held the promise
of renewed inflows of foreign money.
Although rioting
erupted in largely Muslim northern Nigeria after results showed victory
for President Goodluck Jonathan, Nigeria’s All-Share Index rose 2.8
percent to cross the psychologically important 25,000 level.
Protests in the
strongholds of opposition leader Muhammadu Buhari are far from the
oil-producing regions of the Niger Delta and the main industrial centres
of the south.
“Investors will be
reassured by the fact that a run-off has most likely been avoided,” said
Alan Cameron, London-based economist for Nigerian stockbroker, CSL.
“If the final result
is as decisive as these first figures suggest, Jonathan will have a
strong mandate to press ahead with his economic reform agenda, and this
will likely be seen as very positive for markets.” Other assets ? the
country’s debut Eurobond and naira currency ? were broadly steady after
the election, with analysts anticipating a rally in the coming weeks.
“The past weekend’s
successful elections in favour of the incumbent could see further
improvement in market sentiment,” Bank of America Merrill Lynch said.
“The naira most recently weakened from early April … but could now find some support, the bank said in a note to clients.
The naira last traded at 154.86 to the dollar. The yield on the eurobond was 6.376 percent.
Despite the violence
in the north, analysts said risk perceptions for Nigeria had improved
after the election and a Jonathan victory should ensure policy
continuity.
Because he is from
the oil-producing Niger Delta, his election could also avert any
resumption of troubles there which might have been on the cards if he
had lost. Share purchases by foreigners almost doubled last year to 381
billion naira ($2.5 billion) and expectations are strong for further
inflows if the post-election disturbances are contained.
“We will see a lot
of investors coming back to Nigeria,” Rencap’s West African chief
executive, Rotimi Oyekanmi, told Reuters. “Share prices are low …
which shows there’s real upside in Nigeria.” Nigerian banks have
repaired balance sheets and returned to profitability after heavy
write-downs and loan loss provisions in the wake of a $4 billion
sector-wide bailout.
First Bank and
United Bank for Africa, two of Nigeria’s top lenders by assets, both
posted better than expected pretax profits last week.
A fund manager at
London-based Renaissance Asset Managers shared the generally positive
outlook on Nigeria but said much more than the election was needed for a
sustained market rally. “I think where you will see much of a change is
as infrastructure begins to roll-out which will create more
opportunities,” said Sven Ritchter, head of frontier markets.
“You may see some
changes in the stock market and Eurobond but the election in itself is
not enough to make the kind of changes we anticipate for larger amounts
of money to come in.”
Reuters
