On Monday, June 3, 2024, the official foreign currency (FX) market in Nigeria had a sharp decline in turnover, plunging by 42.92%.
On the opening trading day of the week and month, it seemed that investors and traders exercised caution. Lower trading volumes were probably the outcome of the participants’ cautious approach, which allowed them to assess the state of the market before making big decisions.
Additionally, this crisis occurs at the same time as a nationwide strike called by labor unions, which perhaps indicates how industrial actions affect market participants’ cautious stance.
Reduced Foreign Exchange Turnover
FX turnover fell sharply, by 42.92%, from $213.52 million to $121.87 million, according to FMDQ data. After two weeks, this is the lowest FX turnover value.
The sharp decline highlights the decreased activity and liquidity in the market, indicating the players’ fear and uncertainty amid the strike.
The naira’s volatility versus the dollar
During this time, the naira’s performance against the US dollar was not entirely favorable.
The naira had a 0.67% increase on Monday, closing at N1,476.12/$1, as opposed to N1,485.99/$1, which was the closing rate on Friday.
The naira saw significant fluctuation in the month prior, dropping almost 5.6% in value in May.
This occurred despite the Central Bank of Nigeria’s (CBN) attempts to intervene in the market by selling more foreign exchange, which most likely caused Nigeria’s external reserves to drop by a small amount of $65 million over three days.
Nigeria’s foreign exchange reserves decreased slightly from $32.743 billion on May 23, 2024, to $32.678 billion on May 28, 2024, as a result of the CBN selling more dollars on the official market.
Things To Note
The naira has been under extreme pressure in the nation’s precarious foreign exchange market even after improved liquidity in May and the central bank’s attempts to impose various restrictions on BDC activities, including street trading, overseas outward transfers, and banning the use of the local currency on virtual P2P trading platforms.
The volatile foreign exchange rates of the previous month confirmed the erratic state of the market and the difficulties the CBN faces in controlling the nation’s currency rate.
The notable decreases and increases suggest increased susceptibility to both internal policy initiatives and external economic forces.
The country’s top bank allowed International Oil Companies (IOCs) to sell authorized forex dealers 50% of the remaining revenues from their repatriated exports in an attempt to increase liquidity in the foreign currency market. This action along with other measures could increase market liquidity even more this month.
NGX Declines 0.13% Amid Bearish Response to Strike Action
Given the statewide strike, investors’ sentiments were cautious, and the Nigerian Exchange began June on a negative note.
Closing at 99,118.86 points, the All-Share Index showed a 0.13% decrease from the previous 99,300.38 points.
The market value dropped from N56.172 trillion last Friday to N56.07 trillion, with equities losing N100 billion. Â
8,082 deals were made in the market today, which is a slight 5% less than the 433.998 million shares that were traded during the previous trading session. This means that 349.590 million shares were turned over in a turnover volume of shares.
There was a minor improvement in the market breadth, with 22 equities recording gains compared to 16 losses. The market’s negative performance was primarily caused by stocks related to banking, including FBN Holdings (down 4.69%), UBA (down 1.35%), and Seplat (down 1.3%).
Investors responded to the announcement that the CBN has revoked Heritage Bank’s license as well. The news from Heritage Bank had a domino effect on the share prices of smaller banking stocks, even though they were not listed on the NGX; Unity Bank dropped 9.80% and Jaiz Bank lost 9.65% as a result.
Market Features
Cornerstone Insurance and Deap Capital topped the market in gains, both rising by 10%.
Oando Plc gained 9.75%, Veritas Capital, RT Briscoe, and Regency Alliance Insurance gained 8.47%, 8.33%, and 8.33%, respectively, and they were followed by these companies.
While eTranzact International lost 9.82%, Unity Bank lost 9.80%, Jaiz Bank lost 9.65%, McNichols Plc and Japaul Gold lost 9.09% and 4.78% respectively, were the biggest losers. Â
Veritas Capital, which gained 8.47% with 57.391 million shares, was the most traded stock on the market. It was followed by GTCO with 47.634 million shares, Access Holdings with 46.322 million shares, AIICO with 30.706 million shares, and Regal Insurance with 14.555 million shares.
With N1.89 billion, GTCO topped the way in turnover value, followed by N796.32 million from Access Holdings and N397.37 million from MTN Nigeria. Guinness Nigeria reported a turnover value of N283.92 million, up 0.61%, while Zenith Bank reported a turnover value of N236.28 million. Â
Updates on FUGAZ and SWOOTs
Stocks valued at more than $1 trillion essentially remained unchanged, except for Seplat Energy, which saw a 1.3% decrease. Airtel Africa, BUA Cement, BUA Foods, Dangote Cement, Geregu Power, GTCO, MTN Nigeria, Transcorp Power, and Zenith Bank—other members of the SWOOT category—did not report any adjustments to their prices.
Bearish sentiment prevailed for top-tier banking equities, with FBNH, UBA, and Access Holdings losing 4.69%, 1.35%, and 0.29%, respectively. Zenith Bank and GTCO did not release any updates during the day. Â
