Stocks fall to four and half months low

Nigerian stocks fell to a four and half months low on this week, undermined by heavyweight cement and energy firms, while the naira currency firmed on the parallel market on weak demand.

The local bourse index declined 2.59 percent to 29,909 points, its lowest since March 25, with Dangote Cement , which accounts for a third of market capitalisation, and energy firm Seplat fell five percent apiece to 171.48 naira and 270.75 naira each.

Nigeria’s stock market, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, fell for the sixth consecutive day as investors switched funds to shorter-dated money market instruments with higher yields.

Flour Mills of Nigeria shed 4.96 percent to 26.63 naira, Nigerian unit of South Africa’s Standard Bank Stanbic IBTC fell 4.98 percent to 18.88 naira and beverage maker Cadbury was down 4.98 percent to 31.64 naira.

On the foreign exchange market, the naira traded at 217 to the dollar in the parallel market, better than the 221 it closed last Friday amid improved dollar liquidity as central bank sustained its dollar sales in the market, traders said.

“The market has started feeling the effect of the dollar sales by the central bank in the last two weeks and tight measures introduced to prevent cross boarder currency trafficking,” Aminu Gwadabe, president of Nigeria’s bureaux de change association, told Reuters.

The central bank increased the frequency of dollar sales to the bureau de change operators two weeks ago to twice-weekly from the usual once a week previously in a move meant to increase liquidity in the market and support the local currency.

Traders said many people are no longer willing to hold dollars after the central bank banned dollar cash deposits in dollar accounts held locally by bank customers.

“We expect to see more rallies in the market if the central bank could sustain its support for the naira,” Harrison Owoh, a bureau de change operator said.

The naira was unchanged at the official interbank market at 197 to the dollar, where the central bank has maintained a tight control by pegging it to the rate of 197 to the dollar.