As Tinubu reforms lose traction, markets turn around.

Nigerian stocks and Eurobonds have experienced a decline in investor confidence since President Bola Tinubu’s bold policy reforms, such as the removal of petrol subsidies, have been implemented. The stock market closed lower for the third consecutive day on Wednesday, while Nigeria’s sovereign Eurobonds were the worst performers in emerging market credit for a second day. Investors have gone from trading an average of N11.8 billion worth of Nigerian stocks everyday in June to an average of N5 billion in August, a more than 100% drop. Nigeria’s Eurobonds have also gone from world-beaters to big losers, with eight Nigerian bonds in Bloomberg’s EM Sovereign Total Return Index featuring among the 20 worst performers globally on Wednesday.The renewed sell-off in Nigerian stocks and Eurobonds comes on the heels of concerns about Tinubu slowing down and potentially reversing some of his policy decisions, such as the costly petrol subsidies he removed in June. The government has announced that it will suspend further increases to petrol prices after the product’s landing cost, now at N651.75 per litre, surpassed the average retail price of N617 per litre. The exchange rate, a key factor in determining the price of petrol, has depreciated sharply since the bold move to float the currency in June but has come under even more pressure in the last one week.The naira has fallen sharply against the dollar in the parallel market in the last one week, with the Central Bank (CBN) having less firepower in external reserves than previously claimed. The naira fell to a record low of N950 in the parallel market, trading at N910. President Tinubu assured Nigerians that there would be no increase in petroleum products prices, but the government is not calling it what it is and not specifying who will bear the cost due to no budget cover for the payment.The next stage of reforms is likely to be much more difficult due to the overly loose monetary policy stance, continued monetization of the budget deficit, and re-emergence of a large parallel-market premium..