Nigeria’s economy suffered significant setbacks as a nationwide strike caused a massive N141 billion loss in the equities market over just two days. Despite the Nigeria Labour Congress (NLC) suspending its strike temporarily, economic analysts remain concerned about the lasting impact on financial markets. The strike, sparked by disputes over increased electricity tariffs and unresolved wage negotiations, has shaken investor confidence and market stability.
Data from the Nigerian Exchange Limited (NGX) illustrates a sharp decline in trading activities. At the start of June, the total number of deals, volume, and value of stock transactions fell by 5.20%, 19.45%, and 38.92%, respectively. Market capitalization also dropped from N56.172 trillion to N56.069 trillion, marking a N103 billion decline. The following day, the market lost an additional N38 billion, culminating in a total loss of N141 billion in two sessions.
Amidst the strike, the naira tumbled, nearing a record low of N2,000 against the British pound at the parallel market. While the official market showed slightly better conditions, the parallel market rates were N1,861 and N1,875 to the pound on consecutive days. Analysts attribute this sharp depreciation to the strike-induced disruptions, which spurred increased currency speculation and hoarding, along with delays in foreign exchange distributions to Bureau de Change operators.
The volatility of the exchange rate continues to alarm investors, as noted by experts at Rand Merchant Bank (RMB). “The instability in the exchange rate, coupled with persistent inflation, is deterring foreign investment,” they reported. Additionally, analysts from Cordros Research predict further declines in the naira’s value, highlighting ongoing demand pressures and market dynamics that challenge the currency’s stability despite the Central Bank of Nigeria’s (CBN) efforts to stabilize the market through strategic interventions and attracting foreign portfolio investments.
Despite the dire current situation, some market analysts see the potential for recovery in equities as domestic investors may turn to the stock market for stability and possible gains amidst the currency turmoil. The situation remains fluid, and the economic outlook is cautious as stakeholders closely monitor the unfolding impacts of labor disputes and governmental responses on Nigeria’s financial landscape.
Source: Sun News
