Frontier Markets, Stocks

Nigeria Rolls Out Stock Market Circuit Breaker As Index Off To Worst Start Since 1999

Nigerian Stock ExchangeFollowing in the footsteps of China, Nigeria will attempt to curb price swings on its stock market by introducing a circuit breaker system as equities in Africa’s biggest oil producer have plunged so far this year, Bloomberg reports.

According to the Bloomberg report, trading on the Nigerian Stock Exchange (NSE) will be stopped if the index moves 5 percent from the last close, and if the circuit breaker triggers for a second time then trading will be suspended for the remainder of the day.

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Trading on the Nigerian Stock Exchange will be stopped for 30 minutes if the All Share Index moves 5 percent from the previous day’s close between 10:15 a.m. and 1:45 p.m., the Lagos-based bourse said in a statement on its website. The market will close for the day if the circuit breaker is triggered for a second time or after 13:45 p.m.

The move comes as the NSE experienced its sixth day of losses as The All Share Index fell 3 percent on Friday, extending its weekly fall to 13 percent, the most in the world after Egypt. The index has plunged 18 percent so far this year, which is the worst start since at least 1999, according to Bloomberg data.

Investors are panicking with oil prices having dropped significantly in the past week,” Seun Olanipekun, an analyst at Investment One told Bloomberg. “It’s the NSE trying to manage the market so that the All Share Index doesn’t significantly decline.”

Nigerian Stocks - BBG

The implementation of the circuit breaker rule was originally approved by Nigerian authorities in May 2014.

At the start of 2016, China rolled out a new controversial circuit breaker system and during the first trading session of the new year, on January 4, markets tumbled.

The first halt of Chinese stocks that day was triggered at 1:13 p.m. local time as losses in the CSI 300 reached 5 percent. After the suspension was lifted investors then rushed to sell, with turnover peaking in the final minute before a 7 percent slump froze trading in shares, futures, and options for the remainder of the day.

Later that week, on Thursday January 7, China’s Central Bank accelerated the pace of the devaluation of the Chinese yuan, and thus sent markets into a freefall.

China halted the day’s trading on January 7, after only 29 minutes of opening up as shares crashed by over 7 percent, the second time that week that trading for the day was suspended.

Later that day, China decided to scrap its circuit breaker system after learning the hard way that it spurred investors to rush to sell on days of sharp declines.

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  1. Pingback: IMF Urges Nigeria To Devalue Currency As Its Economy Crumbles | EMerging Equity - February 24, 2016

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