By our reporter

Nigeria’s economy is struggling from being strangled by three interconnected forces: stock market woes that had seen market capitalisation shed N400 billion in two days, with the index falling 2.3 pct to below 36,000 points, dragged down by the ailing naira and falling global oil prices.

The local bourse has fallen consecutively for the past 10 sessions, with 52 stocks in the red out of the more than 200 stocks listed and only five posting gains. Market capitalisation depressed to N11.9 trillion today, from N12.17 trillion on Tuesday, following the serial losses. And there is no indication, there will be a respite before the week runs out. Once again like in 2008, stock holders may be in for another emasculation of their investments.

Analysts attributed the persistent bearish trend at the exchange to exit of foreign investors due to drop in oil price at the international market.

They also attributed the development to political uncertainties in the country as a result of the 2015 general elections.

Nestle recorded the highest price loss dipping by N49 to close at N931 per share. It was trailed by 7UP with a loss of N14 to close at N141, while Lafarge Wapco dropped N9.67 to close at N89.61 per share.

Nigerian Breweries lost N4.94 to close at N151, while Total depreciated by N2.71 to close at N155 per share.

Only few socks in the banking sector recorded miniscule appreciation.

The sharp drop in global oil prices has raised the twin spectres of a potential currency devaluation and budget shortfalls in Nigeria just as Africa’s biggest economy gears up for a closely fought and costly presidential election in February.

Nigeria, the continent’s top producer, relies on oil for only 14 percent of its gross domestic product (GDP) but crude makes up 95 percent of foreign exchange and about 80 percent of government revenues, both of which have shrunk rapidly as Brent crude lost more than a quarter of its value since June.

Foreign portfolio investors fearing heavy losses on the currency have pulled out — the main share index hit a 16-month low and the yield on government bonds rose 10 basis points on Wednesday.

The naira has lost around four percent this year, prompting the central bank to hold frequent additional dollar sales and lower the limit on banks’ foreign currency borrowing in efforts to prop it up.

At around 167 to the dollar, it is well outside the central bank’s target band of 3 percent plus or minus 155 to the dollar. The last time it was in the target range was in late January.

Foreign reserves fell rapidly from a peak of $48.9 billion in May 2013 to just $36 billion in June. They have since rebounded slightly and are currently around $38.3 billion.

Despite these losses, analysts say that a devaluation before the elections, when President Goodluck Jonathan will seek a second term, would be so unpopular that it’s unlikely unless oil prices, now at $82 a barrel, tumble further and force the bank’s hand.

“It will take some time of relatively low prices … before you see foreign reserves really being gobbled up,” Matthew Searle, senior African analyst at Business Monitor International, said.

“If oil prices fall further to the $60s or $70s a barrel, then the central bank will become the main source of dollars,” and will have to decide for how long it can keep up the fight.

At what point it throws in the towel is hard to tell.

Alan Cameron, London-based economist at Nigeria’s First City Monument Bank, thinks reserves would likely have to slide to close to $30 billion before a “last resort” devaluation would be considered.

The last time the bank lowered its target range for the currency was in late 2011 after the naira came under speculative attack and tight monetary policy failed to defend it.

“FISCAL EXPANSION”

In addition to a weak currency, Nigeria faces an increasing squeeze on its government finances.

Finance Minister Ngozi Okonko-Iweala told journalists last week that “Nigeria is not broke”, and analysts agree the country is a long way from struggling to meet its commitments.

Yet a squeeze on funding is being felt. A source at the National Assembly said money for projects is not being dispersed as easily as before oil prices fell. An official at a construction company, who declined to be named, said payments for a number of projects are in arrears.

Oil analysts do not anticipate Brent recovering to over $100/bl with an average of $93.70/bl expected in 2015. A production cut by the Organisation of the Petroleum Exporting Countries (OPEC) seems unlikely.

Oil producers have become accustomed to high oil prices, which have held largely above $100/bl since the Arab Spring in 2011, and all are having to adjust to the new climate, but Nigeria, with a population of 170 million people, was spending too buoyantly when times were good.

*News Agency of Nigeria and Reuters contributed to this report