In the last two weeks, investors at the Nairobi Securities Exchange (NSE) have taken profits, which has reduced investor wealth by Ksh127.4 billion ($968.8 million) while bank stocks have been the most affected as their prices have dropped even though the shares are still eligible for final rewards.

By March 27, investors’ wealth on the NSE had reached a one-year high of Ksh1.84 trillion ($14 million). This was due to sharp gains in bank stocks as the lenders finished reporting for the full year that ended in December 2023.

The market capitalization, which is a measure of how wealthy investors are, has now dropped to Ksh1.712 trillion ($13 billion). Analysts say this is because people are taking profits, which has skewed the market by making more shares available than people want to buy. Because of this, share prices have gone down.

Most of the stocks in the banking sector hit multi-month highs at the end of March. Since March 27, their market value has dropped by Ksh44.42 billion, bringing it down to Ksh686.2 billion.

Safaricom’s market value has dropped by Ksh94.2 billion since the end of March, to Ksh679.1 billion. This is after rising in March before the book closed on a Ksh0.55 share interim payment. The telco’s share price dropped from Ksh19.30 on March 27 to Ksh16.95 on Tuesday.

“We have seen increased offers on the trading board, without the offsetting bids, hence the price trend. Broadly, it is about investors weighing the time value of their money, given that they can get higher yields on fixed-income securities,” said Ronnie Chokaa, an analyst at AIB-AXYS Africa.

Together, the rise in prices in March and the strengthening of the shilling against the dollar made it very appealing for foreign buyers to sell their shares. If the shilling is stronger when you leave the market than when you joined it, you get more dollars back on your shares because foreign investors get more dollars per shilling.

The International Monetary Fund (IMF) has predicted that inflation rate in Nigeria will drop to 23 per cent in 2025 with a further drop to 18 per cent by 2026 from the current rate of 33.20 per cent.

The IMF, which made the protection in its Global Economic Outlook released on Tuesday at the ongoing IMF/World Bank Spring Meetings in Washington D.C, said Nigeria was moving in the right direction with economic reforms including exchange rate reforms which it believes contributed to the surge in inflation rate in March.

The report endorsed by
Division Chief, IMF Research Department, Daniel Leigh, noted that with oil prices being on the rise in part due to geopolitical tensions and services, inflation had remained stubbornly high in many countries, including Nigeria.

“We see inflation in (in Nigeria) declining to 23 per cent next year and then 18 per cent in 2026,” Leigh said.

“Growth in Nigeria, steady but actually rising this year, from 2.9 per cent last year to 3.3 percent this year. We have seen an expansion from the recovery in the oil sector, with a better security situation and also improved agriculture, benefiting from the better weather conditions and the introduction of dry season farming.

“So, there’s a broad based increase also in the financial sector, in the IT sector. Inflation, yes, it has increased.

“Part of this reflects the reforms, the exchange rate and its pass through into other goods from imports to other goods.

“So, this explains also why we revised up our inflation projection for this year to 26 per cent. But with the tight monetary policies and that interest rate increase, significant interest rate increases during February and March,” he added.

On his part, head of IMF Research Department, Pierre Olivier Gourinchas, said Nigeria has six to nine per cent inflation target which has been missed by over a decade, but he however, believes bringing inflation back to target should remain the priority for the country.

“There are stark divergences also between countries that call for careful calibration of monetary policy.

“Going forward, policymakers should prioritize measures that help preserve or even enhance the resilience of the global economy.

“A key priority is to rebuild fiscal buffers, especially in an environment with high real interest rates, modest growth, and elevated debts.

Unfortunately planned fiscal adjustments are often insufficient and could be derailed further given the record number of elections this year,” Gourinchas said.