The value of shares traded on the Kenyan stock exchange surpassed Nigeria’s for the first time on record in September, as foreign investors shunned the West African economy, battered by militant attacks on oil facilities and shortages of foreign exchange.
The value of shares traded on Nigeria’s exchange fell to $139 million, near the lowest since Bloomberg began compiling such data in 2009. In Kenya, which has an economy an eighth the size of Nigeria’s, but which is set to grow by almost 6 percent this year, the value rose 4.2 percent from August to $152 million.
Nigeria is caught between the highest inflation rate in more than a decade and an economy set to contract for the first time since 1991. The naira was allowed to float from June 20, losing more than a third of its value against the dollar since and weakening beyond 300 per greenback for the first time on July 22. The float is anything but free, with Aberdeen Asset Management and Duet Asset Management among investors saying the central bank is holding the naira in a tight range.
“Nigeria’s in a recession and it’s got issues around foreign-exchange liquidity,”
Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital, said by phone. “If you compare that to Kenya, an economy that’s growing at 5 or 6 percent, a currency that’s stable, basically you’re seeing a reflection of greater interest in Kenya simply because there”s growth.
“Over and above that, in the case of Kenya, if they want to repatriate their money tomorrow, the foreign-exchange liquidity is available, whereas in Nigeriait’s more of an issue: you have to wait a longer time to get your dollars out of the country,” Mhango said.
The lack of foreign-exchange liquidity looms as a greater obstacle to foreign investment in Nigerian than the moribund economy, according to Mhango. “As that clears, you’ll see improved interest, even before the economy starts showing positive growth — as long as the liquidity issue is addressed, you’ll see a pickup in activity.”