For most African stock markets, July was a gloomy month as most market indices trended downwards according to a report by S&P. The S&P All African Index was down 3 percent in US dollar terms beating the S&P Emerging BMI which fell 7 per cent. S&P Nigeria BMI and S&P Kenya BMI recorded the most losses; both fell 13 per cent even as Morocco, Botswana, Mauritius and South Africa recorded gains. The good news is that S&P All Africa did better than broader emerging market indices in July.
However, investors in Nigeria equities market suffered heavy losses: in the one year to July, the S&P Nigeria BMI fell 42 per cent in dollar terms while the year-to-date index fell 16 per cent. In other words an investor who invested $100 a year ago would have lost $42 while the one that invested $100 in early January would have lost $16. Analysts believe the loss may not be unconnected with the depreciation in the value of the naira as investors took fright and fled the country. Most analysts are not surprised by the poor performance of African bourses given a spate of bad news; from slump in commodities prices affecting oil exporting countries of Nigeria, Angola, and Algeria to terrorist activities buffeting countries in North Africa and the outbreak of the Ebola virus. “Africa has never had it this bad especially since the fallout of the financial crisis ebbed. We have dealt with different class of uncertainties in a short time,” says Jeffery Imasuen, a financial analyst.
Indeed, Nigeria has witnessed a currency depreciation of about 50 percent in the last one year on the back of the slump in crude oil prices in the international market. Worse is that there seems to be no end in sight for the subsisting slump in crude oil price as Iran and the west reached a nuclear deal. With the deal, Iran is expected to start pumping oil which will worsen the glut in the market even as the shale gas revolution is taken its toll on traditional sources of supply including Nigeria.
Analysts are gloomy over Africa’s investment climate. The prospect of achieving positive returns in the African bourses seems remote given the plethora of negative events that dogs its economies. After the rebasing that made it Africa’s largest economy, investors trooped into Nigeria; ready to reap from what seemed like a once-in-a-life-time opportunity. However, that was cut short when crude oil price, Nigeria main revenue earner, took a dive. With many states unable to pay salaries and meet other contractual obligations, Nigeria’s equities market may be just half way into a slow decline.
By Osaze Omoragbon