Foreign Investors Dump Shares Over IMF, CBN Naira Debate

[TGD]

 IN response to the recent International Monetary Fund's (IMF) call on the country to devalue the Naira, some foreign investors have engaged in panic sale of shares, The Guardian learnt at the weekend.

The inability of government to convince global community that the currency is not overvalued, sources said, is responsible for the massive dumping of foreign equity holdings.

A dealer disclosed that he found it difficult to discourage its foreign clients, who sent sales mandate last week, as he was not convinced that the current value of Naira is real and sustainable.  "Can we say the position of IMF is not true? I am not sure any sincere individual can fault that with facts. This is why the investors are panicking," noted the source.

Chief Executive Officer, Lambeth Trust and Investment Company Limited, Mr. David Adonri, who confirmed the development, also noted that the crisis in the Middle East fuels the downward movement of equity prices.

Adonri said: "They are afraid that the value of their investment will fall if the local currency is devalued. To an extent, the fear is logical because if Naira loses one per cent officially, it automatically transfers to their investment. That is why they have been selling massively.  This is the situation; we just hope this will stop soon. Otherwise, it will erode the confidence of the local investors as well."

The  Interim Administrator of the Nigerian Stock Exchange (NSE), Emmanuel Ikhazoboh, observed last week that foreign investors accounted for 68 per cent of the trade volume of the market.

With the indigenous players driving only 32 per cent of the volume, there is apprehension that the market will suffer worse setback in coming months unless the unrests in the Middle East abate and the Naira value debate is well situated.

Managing Director/CEO, Tower Securities Limited, Abimbola Olanrewaju, said issues bordering on confidence building should be properly addressed by all stakeholders, noting that the realities in the market are not in tune with the expectations of dealers.

"The market is 68 per cent driven by foreign investors, most of who come with hot money (hedge funds). Once they receive any negative information, they take their profit. It is risky money. And any market that is largely driven by hot money is at the mercy of the owners of the funds who cannot wait to bear any bruises.

"The crisis in the Middle East is another serious issue that is affecting the market now.  Americans and Europeans don't see any difference among countries in Africa. They are very ignorant about the fact that we have different economies; they believe the conflict in Tunisia, Kenya and others also affects our economy. It is difficult to convince them that we are not affected by the crisis. These are the problems," said Olanrewaju.

However, some brokers, including Managing Director of Dependable Securities Limited, Chinenyem Anyanwu, said it could not be confirmed whether foreign players are pulling out at a disturbing rate. He argued that foreigners whose accounts he managed have not requested to sell.

Former President of the Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, who expressed disappointment over the state of the market, attributed the trend to growing poverty and unstable policies.

Following the 2008 mass exit of foreign traders in response to global economic meltdown, Unegbu argued that the current foreign involvement in the market is too negligible to drive its activities.



Source: Foreign Investors Dump Shares Over IMF, CBN Naira Debate