NSE plunges 2% as Bank's lead sell-off

NSE plunges 2% as Bank's lead sell-off

NSE plunges 2% as Bank's lead sell-off

March 17 (easy kobo) - Contrary to reports that fund managers may be building long positions in stocks, selling pressure increased at NSE today as the market plunged 526 points or 2.11%. Banking stocks led the sell-off as almost all big banks declined. Damning reports of a big militant attack on an Agip oil facility in Bayelsa state increased the security fears before next month's general elections. Analyst speaking to Easykobo said "it is as if the political uncertainity was not enough, that now we have this security concern that makes foreign investors doubtful about investing in Nigeria". To remain updated with Nigeria's financial environment, visit www.easykobo.com daily.

Bank sell-off

Even the warming news of plans of $300 million investment into Sterling Bank from South Africa's First Rand failed to cheer the market. The sell off in Banking shares has a lot to do with a pending increase in the benchmark lending rate by 25 basis points to 6.75%. This would squeeze the profit margins for Banks as their borrowing costs rise.

The declining Naira will erode a sizable portion of profits they report in dollar terms. Earlier this week, CEO of Skye Bank confirmed that profits at the bank would be reduced due to any increase in CBN benchmark lending rates".

Budget

Senate passed a 4.972 trillion naira ($32 billion) 2011 budget yesterday, weeks ahead of elections, increasing the spending plans from President Goodluck Jonathan's initial proposal three months ago. This is likely to cause more inflation which is already high at 11.1%

Therefore CBN has no option but to raise the benchmark lending rate, not only this month but prpbably as much as twice or thrice later this year. That is the main reason for the sell off in the Banking sector today.

Round up

At the NSE today, banking sector led the sell off with

Access Bank down 5%,

Zenith Bank was down 4%,

UBA was down 4.5%,

First Bank was down 4.2%,

Sterling Bank down 0.8%

GT Bank was up 1%

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