Nigerian stocks posted their biggest daily decline in 16 months on Monday as investors waiting for clarity on a new central bank currency policy sold shares to book profits after a recent rally.
The All Share Index closed down 4.26 percent, its biggest drop since Jan. 6, 2015, dragged down mostly by a sell-off in the relatively liquid banking sector.
Nigerian stocks crossed below the psychologically important level of 28,000 points on Monday, underperforming emerging markets peers, which rose 0.14 percent.
“Stocks tumbled on panic selling. The bullish trend in the Nigerian equities market was reversed … amid profit taking and FX uncertainty following the Democracy Day speech,” analysts at Vetiva Capital said in a note.
President Muhammadu Buhari during his Democracy Day speech on Sunday backed a central bank decision to move away from a dollar peg, after rejecting for months calls to devalue the currency. The naira is considered overvalued because of the peg.
The central bank said last week it would introduce a flexible currency regime and abandon its 15-month naira peg to the dollar, a policy U-turn designed to boost exports, local manufacturing and stave off a recession.
The stock market, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, hit a six-month high last week as the central bank announced the move, aimed at luring foreign cash.
However, the bank has yet to clarify how the new policy would work, spooking foreign investors, long worried about getting caught in the middle of a currency devaluation.
Top-tier banks Zenith Bank and FBN Holdings, Ecobank each dropped more than 9 percent. United Bank for Africa (UBA) and Guaranty Trust Bank (GT Bank) each fell more than 5 percent.