SHARE prices on the Nigerian Stock Exchange (NSE) fell to a two-year low yesterday following the revelation that President Muhammadu Buhari intends to re-appoint Central Bank of Nigeria (CBN) governor Godwin Emefiele for another five year term.
Contrary to expectations that the president would let go of Mr Emefiele and replace him with either deputy governor Aishah Ahmed, former Asset Management Corporation of Nigeria chairman Ahmed Kuru or ex-finance minister Mansur Muhtar, President Buhari has surprisingly retained him earlier this week. Mr Emefiele, 57, was first appointed in 2014 by former president Dr Goodluck Jonathan and was retained when President Buhari assumed office in 2015.
With his re-appointment, Mr Emefiele will now remain CBN governor until 2024, making him the first appointee to be given a second term since Nigeria returned to democracy in 1999. However, he re-appointment sent stocks tumblers as investors viewed it as a sign that there may be not be any change to the government’s monetary policy that has kept liquidity tight.
All that remains for the appointment to be complete is for Nigeria’s senate to confirm the nomination and this is expected next week. Investors, however, fear that with Mr Emefiele at the helm, the government will keep a tight rein on the repatriation of profits and the government policy of limiting access to foreign exchange will continue.
Consequently, yesterday, the All Share Index dropped by 0.37% to 28,789 basis points, a level not seen since May 2017. Also, the market capitalisation of equities dropped from N10.860tn on Thursday to N10.842tn on Friday, extending its losing streak to the fifth consecutive day, although Nigerian bonds rallied and the naira currency firmed on Friday.
Bond yields, which move inversely to prices, fell across maturities and extended losses on Friday following Mr Emefiele’s nomination. Local asset managers and insurance companies accounted for much of the bond buying, traders said, with foreigners in the mix.
Also, the benchmark 2028 bond yield fell to 14.20% on Friday, down from 14.36% the previous day while the naira, which has been trading tightly firmed to N360 per dollar after the nomination. Analysts said Mr Emefiele’s return could be supportive for bonds as investors hunt for yields on the debt market while equity players worry about slow growth, expecting sentiment to remain weak for stocks.
One trader at the Nigerian unit of an international bank , added, however, that Mr Emefiele’s re-appointment provided support for a rally that started in the bond market this week, pointing out that offshore buyers welcomed the re-appointment.