Nigerian Stocks Dip Amid Interest Rate Hike, N68 Billion Lost

The Nigerian equities market declined on Wednesday, shedding N68 billion in value following an increase in interest rate to 26.75%.

The Monetary Policy Committee (MPC) of the CBN raised the Monetary Policy Rate (MPR) from 26.25% to 26.75% on Tuesday.

This move is part of ongoing efforts to curb inflation but has made equities less appealing compared to fixed-income securities.

The Nigerian Exchange Limited (NGX) saw its All-Share Index fall to 100,365.17 points from a previous high of 100,486.12.

Market capitalization also dipped to N56.830 trillion. Investors exchanged 497,842,944 shares valued at N8.605 billion in 8,412 deals.

Banking and consumer goods stocks were hit hardest, with significant sell-offs observed. Conversely, insurance and industrial stocks saw some buying activity, indicating a shift in investor preferences amid the changing economic landscape.

The CBN’s decision to increase rates is part of broader measures to tighten monetary policy and rein in rising inflation.

However, this has placed additional pressure on the equities market, which is now grappling with reduced investor sentiment.

United Capital research analysts highlighted that Nigeria continues to face negative real returns, deterring investments in the financial markets.

They anticipate higher yields in the fixed-income sector, which could further influence investor behavior.

Despite the current market pressures, analysts suggest that the upcoming second quarter (Q2) 2024 earnings season might provide some positive momentum.

Investors are keenly watching for potential gains that could arise from corporate performances.

The market’s year-to-date return has decreased to 34.22%, reflecting the broader economic challenges and investor caution.

While this week’s decline stands at 0.17%, the monthly performance has shown a slight increase of 0.31%.