This week, as a result of the Central Bank of Nigeria’s (CBN) careless handling of the naira redesign policy, Nigerian banks lost their appeal as lucrative investment destinations in the capital market.
Ejes Gist News Nigeria previously reported that angry customers who couldn’t get their money out of the facilities were attacking banks.
In Nigeria, there were protests in several states, and among others, bank branches were completely destroyed by the protesters in Lagos, Ogun State, Enugu, and Delta State.
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At least 17 bank branches across the nation had been attacked by irate protesters, according to the Association of Senior Staff of Banks, Insurance, and Financial Institutions (ASSBIFI), which made the announcement on Thursday.
The association also revealed that banks had suffered losses of N5 billion as a result of attacks brought on by the lack of naira notes.
For investors looking to invest in a company directly or through equity funding, the security of the business is essential.
Nigeria is thus no longer a friendly place for banks to conduct business.
In addition to the physical assaults from the general public, state governments have threatened to revoke the licences of Nigerian banks due to the shortage of naira notes, endangering the growth prospects of the country’s banks.
This raises a red flag to current or potential investors who will either withdraw their investment or avoid the banks in the equity market, casting doubt on the banks’ ability to survive.
What impact banks have
Ejes Gist News Nigeria reports that the Nigerian capital market’s Banking Index fell by 1.34 percent as a result of investors’ waning confidence.
The Banking Index fell by 6.05 basis points over the course of the week, ending at 446.97 basis points after starting the week at 453.02 points.
This indicated that equity investors had either decreased their demand for bank stocks or had abandoned them in favour of other capital market investable assets.
As a result, the Banking Index on the capital market declined by 1.34 percent, declining more rapidly than the All-Share Index, which dropped by 0.96 percent, from 54,327.30 to 53,804.46.
leading five losers
Fidelity Bank shareholders lost -14.70 percent of their investment in the company during the week, making them the biggest losers.
As a result, after Friday’s trading ended, the share price of Fidelity Bank fell to N4.76kobo. The lender had a Friday closing price of N5.58kobo per share.
Due to the lack of interest from investors, FCMB joined the list after shareholders’ investments lost 6.96 percent of their value in just five days.
As a result, FCMB’s share price fell during the period from N4.60 to N4.28.
The investment value of Zenith Bank’s shareholders also decreased by -1.96 percent over the course of the week.
The lender’s share price decreased from the previous week’s N25.5 kobo to N25 at the end of the week.
The investment value of Sterling Bank, which was accused of hoarding the new Naira notes, fell by 1.29 percent, according to a report.
Due to low interest in the company on Friday, Sterling Bank’s share value decreased from N1.55 kobo to N1.53 kobo, according to trading data.
The list was completed by UBA, whose shareholders returned home having lost 0.59 percent of their equity stake in the bank.
This was reflected in UBA’s stock, which sold at N8.35kobo at the end of trading on Friday rather than the N10.55kobo per share reported the previous week due to low demand.
Charles Abuede, an analyst at Cowry Asset Management Limited, predicted that investors’ confidence in banks would increase in the upcoming weeks despite the possibility that the attacks are a sign of things to come given their impact on operations.
Indicators that will inform investors of what will happen after the elections, he said, include the current trend of attacks on banks and their assets.
“Despite the recent unrest involving banks and their assets, we do not see investors’ confidence eroding. The violent act we have seen thus far, however, is probably going to have an effect on banking operations and margins.
“Only this week, as investors reacted to the attacks as well as the recently released macroeconomic data, the banking index was down nearly 2 percent week-over-week” (inflation).
“This is a result of the CBN’s policy effect attendant effect, and it still translates to the existence of the apex bank’s weak transmission mechanism, which has instilled fear among many.
As we await the filings from the tier-1 banks and other early filers in the upcoming weeks, Cowry Research believes that investors’ sentiments towards banking stocks will improve in the upcoming week.
“This is anticipated to fuel optimistic feelings and increase investors’ confidence overall.”
