Nigerian stocks are surging today after a peaceful presidential election won by challenger Muhammadu Buhari. He’ll be replacing Goodluck Jonathan, who had been president since 2010.
Jonathan’s party has been running Nigeria since 1999, when the country had its first presidential election since a 1993 coup.
Contrary to some fears, Jonathan conceded without a struggle and markets are loving it. The NSE 30 index of Nigerian stocks is surging:
Stocks still below their 2014 peaks, when they climbed to just below 2,000. Nigeria is a major oil-producing nation and the slump in commodity prices has hit the country hard.
Buhari has actually been in power before as the country’s head of state after a 1983 military coup, but he now says he’s a converted democrat.
Here’s what Bank of America’s analysts had to say before the results came out, suggesting any “relief rally” in stocks would be misplaced:
We would temper any enthusiasm with the following: First, it is still too early to ascertain whether potential violence could become destabilising, presenting some downside risk. Second, although hopes are high that Buhari will tackle Nigeria’s endemic corruption problem, in reality very little is known about key ministers he may appoint and his ability to effectively lead the country 30 years after he was deposed in a military coup.
Last, the currency still presents an overhang. We expect further devaluation in 2015 as the spot rate converges to the black market rate due to the evident excess dollar demand onshore. We forecast that NGN/USD will average 215 this year.
Nigeria’s naira has slumped in value in recent years — from less than 120 to the dollar in 2008, to just over 160 in most of 2014. After the plunge in oil prices, it’s now running at about 200 to the dollar and as BAML’s analysts suggest, it could weaken even further.