Nigeria has remained mostly unaffected to the kind of short-term volatility agitating more established emerging market peers
Nigeria has remained mostly unaffected to the kind of short-term volatility agitating more established emerging market peers.
But analysts warn that the turmoil on Wall Street could pose longer-term risks to prospects for a recovery in sub-Saharan Africa's second biggest stock exchange if it fuels a global slowdown that saps prices for oil exports.
Nigeria enjoyed one of the strongest performances of any emerging market last year on the back of surging demand for banking stocks following a successful consolidation exercise.
Banks such as United Bank for Africa, First Bank and Access Bank used the funds to expand across the continent.
But growing global concerns over bank valuations helped trigger a steep correction in Lagos - where banks make up about two-thirds of the total market capitalisation of $85bn. The NSE All Share Index has lost 31.44 per cent since March 5, according to Afri-Finance, the advisory firm.
Although foreign investors have played a role in influencing sentiment in Nigeria, last year they accounted for only about 12 per cent of the value of transactions, limiting their potential to cause havoc with a hasty retreat. Nigerian banks are, however, concerned that the credit crunch will make it harder to secure credit lines in the US and Europe for trade finance.
Another worry is how banks will manage their losses in the local market. Much of last year's gains were driven by banks lending money for share purchases that have soured.
Author:
Jo Amey
