Monday, January 28, 2019 9.00PM / Teslim Shitta-Bey with Saheed Kiaribe, Proshare Research
Investors in the local stock market have begun to respond to news about the suspension of the Chief Justice of Nigeria, Justice Walter Nkanu Onnoghen, the unfolding events suggest a mild equity sell off as both local and foreign money managers keep an eye on developments, particularly sensitive to the outcome of the meeting of the Nigerian Judicial council (NJC), scheduled for tomorrow Tuesday, 29 January, 2019. According to Olusegun Atere, Head of trading strategy at Apel Assets & Finance, “today’s trading dip after last week’s bullish run does appear to mirror the markets growing caution over developments in the judicial space. Foreign investors are getting a little jittery about Nigeria while local investors are adopting a ‘siddon look’ (wait-and-see) orientation towards the market. A lot hinges on what plays out over the next few days’’, he observes. The implication is a lull in demand for stocks and a slow sell off by those with a weak stomach for high-stakes political power play.
Cause for fear
The markets fear centres on last week’s developments where the following events took place:
Responding to the noise
Responding to these events the international and local investment communities have begun to readjust country risk ratings as they discount equity values and put pressure on local bond prices.
Table 1 Bond yield movement in the last week 21-25 January 2019
Source: World Bond Market
The country’s 90 day bond lost -191.2bps over the week as the twists and turns of the Onnoghen saga continued. This was over half of the loss of -311.6 bps in the last one month. The maximum yield on the 90 day fixed interest instrument was +14.461% at the beginning of last week before toppling over to +12.549% by weekend, its lowest yield calculation for the week.
Chart 1 Nigeria Bond market yield April 2018-January 2019
The equity market has also taken a punch to the jaw at the beginning of the week as traders had a rethink of their last week bullishness. The stock market dropped -0.26%or 26bps on investor apprehension of market conditions based on uncertainty surrounding the FGN’s suspension of the Chief Justice of the Federation.
Chart 2 Nigerian Stock Exchange All Share Index 21-28 January 2019
Source: NSE, Proshare Research
A society split
The Onnoghen suspension has split Nigerians into two distinct camps; those that believe that the Chief Justice suspension was justified by his breach of the code office he swore to uphold and those that believe that the process of suspension amounted to executive overreach and was a violation of the Federal constitution which requires that the NJC sits and investigates allegations against senior judicial officers before they vcan be arraigned for misconduct. Indeed the removal of the Chief Justice of the federation requires a two-third endorsement by members of the Nigerian Senate. Some analysts have noted that the current constitutional crisis reflects a number of fundamental facts and anomalies:
With the FGN’s decision to suspend the Chief Justice apparently politicized, the options for the cooling of frayed nerves is becoming increasingly distant. The government seems to have increasingly alienated itself from a critical support-base that brought it to power which could have ominous implications for the administration and the country as a whole as investors begin to reassess safety of investment and stability of the polity.
As the week passes the Onnoghen suspension issue will continue to dominate both the political space and the already restless equity and money markets. A lot will hinge on tomorrow’s decision of the NJC and the FGNs response. Until then financial market stakeholders have decided on a waiting game.