Global consulting firm, PricewaterhouseCoopers (PwC), says the coronavirus and macroeconomic instability in Nigeria lowered investors and issuers confidence in the Nigerian capital market.
The firm said this in a report titled ‘Nigerian capital markets update- September 2020’.
PwC said that the instability, caused by the COVID-19 pandemic and volatility in commodity prices, affected the domestic equities market.
“Macro-economic indices and forecasts portray rather low level of investors’ confidence in the domestic investment climate as foreign direct investment (FDI) and foreign portfolio investments (FPI) plunged 33.41% and 91.14% respectively, year-on-year in Q2 2020,” PwC said.
“Stock market returns, measured by Nigerian Stock Exchange All Share Index (NSE ASI), dipped by 8.8% as at H1 2020 year-to-date from 26,842.07 in December 2019 to close at 24,479.22 in June 2020.”
PwC noted that in H1 2020, the twin combination of the outbreak of the novel coronavirus (COVID-19) and volatility in commodity prices impacted the Nigerian economy as well as other emerging economies.
According to the Nigerian Bureau of Statistics (NBS), Nigeria’s gross domestic product (GDP) contracted by -6.1% year-on-year in Q2 2020 and by -8.22% when compared to the GDP growth rate of 2.12% recorded in Q2 2019.
The sectoral growth recorded in the agriculture (1.58%), finance and insurance (18.49%), and information and telecommunications sectors (15.09%) in Q2 2020 could not level out the decline recorded in other sectors due to the nationwide lockdown.
Expectedly, it said, the transportation & storage and accommodation & food services sectors suffered the worst contraction of -49.2% and -40.19%, respectively.
“Crude oil price volatility has continued to put pressure on foreign exchange stability which has necessitated several exchange rate adjustments by the Central Bank of Nigeria from N307/$1 inMarch 2020 to N380/$1 in August 2020, indicating a naira devaluation by 23.8%.
“Similarly, headline inflation rate has been on the rise, from 11.22% in June 2019 to 12.13% in January 2020 and 12.56% as at June 2020.”