Following the suspension of Central Bank Governor Godwin Emefiele, the Nigerian stock market experienced a significant surge, reaching its highest level since July 2008.
Investors are speculating on a potential currency devaluation, leading the main index of the Nigerian Exchange to surpass 57,437 points.
In contrast, MSCI’s main emerging equity benchmark showed a flat performance.
The country’s stocks have gained 11.8% year-to-date, nearly double the 6% return on the MSCI index.
This rally, along with the recent gains in Nigerian dollar bonds, reflects optimism regarding the policy signals from newly elected President Bola Tinubu.
Analysts, such as Tajudeen Ibrahim from Chapel Hill Denham, suggest that an improved economy will positively impact the performance of companies operating in the market.
Additionally, the NGX Banking Index has witnessed a significant increase of 8.5% to 570.64, marking its largest advance in over eight years. The anticipated convergence of the exchange rate is expected to enhance liquidity in the foreign currency market and increase trading activities for banks.
However, there is growing pressure for the Nigerian naira to depreciate further towards its market value, as it has already fallen to 474 per dollar, prompting traders to bet on additional depreciation.