The naira weakened on the forward market on Monday and Nigerian stocks fell as investors worried that delaying elections for a week could lead to a contested result. Analysts say a contested result could fuel uncertainty in the markets.
The one-year non-deliverable naira forward opened at a quote of 401 per dollar, compared with 397 in the previous session. Stocks dropped 2.51 percent to a one-week low. They had climbed past a three-month high on Friday.
“There is some frustration on behalf of investors who have had concerns about this election for the better part of the past year and are ultimately hoping to simply put it behind them,” said Christopher Dielmann, a senior economist at Exotix Capital.
Investors had started to pick up shares to position for a post-election rally, assuming that the election would pass without violence or other problems. That boosted dollar liquidity on the currency market.
On Saturday, a few hours before polls were set to open, Nigeria’s election commission decided to postpone the presidential election until February 23.
The delay hit Nigeria’s dollar-denominated bond yields and could affect demand at a government naira debt auction this week.
“Some investors might still want to wait for the results of the election to gauge risks, such as a possible contestation of the result, which the postponing arguably now has given more grounds for,” said Cobus de Hart, a senior economist at South Africa’s NKC African Economics.
Nigeria has a history of election delays after postponing the 2011 and 2015 votes. President Muhammadu Buhari was meeting with senior members of his party on Monday over the postponement and has urged voters to stay calm.
His main rival, former vice president Atiku Abubakar, said on Saturday that Buhari’s administration hoped to disenfranchise the country’s electorate by delaying the vote.
Analysts say the postponement could disrupt Nigeria’s economic and market rebound.
“The economic consequences of this decision will be felt significantly, as what was supposed to be a smooth process is now mired in lengthened uncertainty and controversy, thereby shaking investor confidence and somewhat eroding the renewed interest from both foreign and domestic investors,” analysts at Vetiva Capital wrote in a note.
“We expect the postponement to directly lead to a reversal in the market with jittery investors quickly withdrawing from the market while others wait on the sidelines.”