On Tuesday, the Nigerian stock market experienced a significant surge, reaching its highest level since July 2008. This remarkable performance occurred on the first day of trading following the suspension of Godwin Emefiele, the Central Bank Governor.
According to a Bloomberg report, investors are anticipating a currency devaluation, which propelled the main index of the Nigerian Exchange to surpass 57,437 points. This stands in contrast to the flat performance of MSCI’s primary emerging equity benchmark. The report highlights that the year-to-date gains of Nigerian stocks have reached 11.8%, nearly double the six percent return on the MSCI index.
The rally witnessed in Nigerian dollar bonds on Monday contributed to this positive momentum. Market participants are optimistic about the policy signals emanating from the newly elected President, Bola Tinubu.
Tajudeen Ibrahim, the head of research at Chapel Hill Denham, emphasized that an improved economy would positively impact the performance of companies operating in the market.
Since assuming office, the new president has abolished fuel subsidies and recently suspended the governor of the central bank, Emefiele. As a result, the NGX Banking Index experienced a significant rise of 8.5%, reaching 570.64, marking its most substantial advancement in over eight years. Ibrahim added that the expected convergence of exchange rates would enhance liquidity in the foreign currency market and foster increased trading activities for banks.
Meanwhile, there is mounting pressure for the naira to depreciate further towards its market value. Currently, the currency stands at 474 naira per dollar, and traders are speculating on additional devaluation.