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Sanusi’s suspension: Banking stocks lead equities’ fall

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IMAGE: Mallam Sanusi Lamido Sanusi »





The decision of President Goodluck Jonathan to suspend the Governor, Central Bank of Nigeria, Mallam Lamido Sanusi, has led to fear and uncertainty in the stock market as investors hurriedly dumped shares, particularly in the banking sector.

A statement on the decision by the Special Adviser to the President on Media and Publicity, Dr. Reuben Abati, said Sanusi was suspended based on the discovery by the President that his tenure as CBN governor had been characterised by acts of financial recklessness and misconduct, which are inconsistent with his administration’s vision.

But analysts explained that news of the suspension at a time when the market was trying to stabilise from the effects of quantitative easing/tapering by the United States and a huge sell-off in the emerging market was not well received by investors.

While the impact of the news affected all sectors negatively – there were only nine gainers on Thursday in contrast to 46 losers, the banking subsector was hit the most. With the exception of Wema Bank Plc and Unity Bank Plc, all equities in the subsector declined.

United Bank for Africa Plc was down by 7.50 per cent, Ecobank Transantional Incorporated Plc fell by 7.42 per cent, Guaranty Trust Bank Plc lost 4.98 per cent, while Union Bank of Nigeria Plc declined by 4.48 per cent.

Following the trend, Diamond Bank Plc shed 4.92 per cent, Sterling Bank Plc lost 4.44 per cent, while Zenith Bank Plc, whose Managing Director, Mr. Godwin Emefiele, was nominated by the President as the next CBN governor, was down by 3.89 per cent.

Also, Fidelity Bank Plc fell by 1.35 per cent, while Access Bank Plc and Skye Bank Plc declined by 0.95 per cent and 0.30 per cent respectively.

FCMB Group Plc, FBN Holdings Plc and Stanbic IBTC Holdings, parent companies of First City Monument Bank Limited, First Bank of Nigeria Limited and Stanbic IBTC Bank Limited, also recorded losses. They fell by 7.12 per cent, 3.80 per cent and 2.45 per cent, respectively.

A review of the sectoral indices also showed that the Nigerian Stock Exchange Banking Index recorded the biggest loss for the day as it fell by 4.46 per cent to close at 367.61 basis points, down from 384.79 basis points.

At the close of trading on Thursday, the major market indicators fell significantly having appreciated for the first three days of the week.

The market capitalisation of the listed equities fell by N186bn or 1.47 per cent to close at N12.468tn, while the NSE All-Share Index was down by 580.9 basis points or 1.47 per cent to close at 38,816.19 basis points.

Analysts and market operators told our correspondent that the suspension of the CBN governor was responsible for the sell-off witnessed on Thursday.

The Chief Executive Officer, Lambert Trust and Investment Company Limited, Mr. David Adonri, said, “Investors perceived it (the suspension) as a negative event that would have some consequences, hence the reaction of the market.”

Adonri explained further that a high level of foreign participation in the market was also a factor.

He said, “The perception that most foreign investors and people outside this country have is that Sanusi has acted independently in pursuing monetary policies that have successfully led to macroeconomic stability in Nigeria, especially price stability. He is also perceived as an anti-corruption crusader.

“So, if such a person, whose contribution has been largely positive and beneficial to the economy, is now being penalised, the reaction, therefore, will be that of fear and caution. That is why we are having a negative reaction in both the foreign exchange market and the equities market.”

The Chief Executive Officer, Trust Yield Securities Limited, Mr. Ola Yussuf, corroborated the view that the suspension affected the direction of activities in the market on Thursday.

“The banking stocks reacted negatively. There is no doubt about that; they went down and attributing it to Sanusi’s suspension is not far off,” he said.

On when the situation is likely to change, he said, “The situation has to be clear for the market to take a firm position. It is a situation of suspense right now. All we know now is that there is a suspension and a new person has been appointed, but before that new person is confirmed, another person is acting (as CBN governor).”

He said as a result, investors were taking a cautious approach.

“As far as the market is concerned, there is a need to clarify the situation and for the next governor to say where he stands on policies that Sanusi was pursuing. Is he going to change the policies or is he going to pursue the same policy? We don’t know,” Yussuf said.

He, however, said considering the fact that Emefiele has been affected by the CBN’s policies as an operator, investors and other stakeholders were curious about the steps he would take as a regulator.

Article Credit: PUNCH Newspaper

Updated 5 Years ago

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