Nigerian Stock Exchange Experiences Drop in Stock Prices While the Naira Weakens
Mirroring similar declines of stocks in other emerging markets, the Nigerian Stock Exchange’s (NSE) all share index fell by 4 percent on Thursday, contributing to a 23 percent drop in stock prices since their peak in July—thus constituting the gauge’s longest downward slide since January 2009. According to Bloomberg, foreign portfolio investors have sold many of their stocks in order to protect their capital in light of the recent dramatic decreases in oil prices.
Low crude prices have equally reduced the Nigerian government’s export earnings from oil, which account for nearly 80 percent of the government’s revenue. In view of these reduced revenues, the naira has weakened and, on Thursday, reached an all-time low against the dollar. Over the past few months, the central bank has been depleting its foreign exchange reserves to support the naira, and further intervened on Tuesday by prohibiting the sale of U.S. dollars to the country’s “importers of telecoms equipment, power generators and finished products.” Facing a continued slump in oil prices, the central bank must decide whether to continue to defend the naira—by exhausting its foreign exchange reserves and increasing interest rates—or devalue the currency. The Wall Street Journal reports that devaluing the naira or raising interests are the more unpopular, politically risky options, so unless the naira appears to be heading toward a currency crisis, the central back is unlikely to take these measures until after the national elections in February 2015.
African Union Imposes Two-Week Deadline on Civilian Transition in Burkina Faso
After President Blaise Compaoré resigned from office last week amid violent protests in the Burkina Faso’s major cities, army chief Isaac Zida took power as interim leader. On Monday, the African Union (AU) called on Zida to return the country to civilian rule within two weeks or face economic sanctions from the organization. Leaders from Ghana, Nigeria and Senegal met with a variety of political and military stakeholders in Ougadougou on Wednesday to assist in naming a civilian interim president; however, the group failed to do so, despite agreeing on the urgent need for a civilian-led transitional government to manage the country until national elections can be held in November 2015. On Friday, Zida dismissed the AU’s two-week deadline, stating, “We are not afraid of sanctions, we care much more about stability and peace for [the] people.” In related news, President Macky Sall of Senegal has been selected by the regional Economic Community of West African States (ECOWAS) body to head negotiation efforts in Burkina Faso.
Zambian Party Leader’s Dismissal Reversed by Interim President
Following President Michael Sata’s passing on Tuesday, October 28, 2014, Vice President Guy Scott was named interim leader of Zambia (as dictated by the Zambian constitution) until national elections take place within 90 days. On the night of Monday, November 4, however, riots broke out after Interim President Scott announced that he would dismiss General Secretary Edgar Lungu from his role as leader of the ruling Patriotic Front (PF) party, without revealing the details behind his decision. Some observers have argued that Scott’s move was a power play to remove Lungu from becoming a top contender for the PF’s presidential candidate as Lungu is from an opposing faction within the PF party. On Tuesday, Scott reversed his decision and restored Lungu to the role of secretary general in the hopes of stemming the protests. On Wednesday, the riots dissipated, and Lungu has since made statements in full faith of the Zambian democratic system and the capacity of the PF to put forward a worthy candidate for the presidential elections, despite factional struggles.