The Central Bank of Nigeria’s aggressive move to tighten monetary policy, increasing the monetary policy rate from 18.75% to 22.75% to control inflation, is heavily impacting the stock market. Investors have lost over N1.4 trillion in just two trading sessions as a result.
The recent rate hike, the first in eight months since the last MPC meeting in July 2023 and the largest since 2007, has had a negative impact on market activity. Most blue-chip stocks have experienced continuous price declines since the announcement.
For example, at the end of trading on Tuesday, 27 stocks saw a decrease in price, with 12 of them listed on the Losers chart. The situation worsened the following day, with a significant sell-off across sectors. This led to 52 stocks being listed as losers, compared to only 5 gainers.
Experts noted that this has made investors adopt a ‘wait and see’ approach. They are waiting to be sure of the market’s direction before investing, given the current uncertain economic outlook.
Ambrose Omorodion, Chief Research Officer at Investdata Consulting Limited, mentioned that investors are reacting negatively to the apparent mismatch in policies between the fiscal and monetary authorities, which is evident in the increasing macroeconomic challenges.”
As the situation shows no signs of improvement, with issues like naira devaluation, rising inflation from imports, and ongoing insecurity, people’s ability to buy things in Nigeria keeps getting weaker. This could mean they might lose all their savings. It’s ironic that while the rate hike is meant to encourage saving, it might end up hurting those who save and invest,” Omorodion added.
According to Victor Chiazor, a senior researcher at FSL Securities, the increase in interest rates is likely to reduce the amount of money going into the stock market. Investors may prefer safer investments with higher returns, which could lead to less money being available for stocks and more going into fixed-income investments.”
Yesterday, the stock market had a bad day mainly because the prices of big and medium-sized companies’ stocks went down. Companies like Dangote Sugar Refinery, Lafarge Africa, Guaranty Trust Holdings, Nigerian Breweries, and FBNH Holdings saw their stock prices drop.
FCMB Group, Lafarge Africa, Nigerian Breweries, Oando, and Red Star Express were the biggest losers, each dropping by 10%. Their stock prices closed at N7.20, N31.95, N30.60, N9.90, and N3.42 respectively. FBNH also saw a big drop of 9.97% to close at N27.55, while UPDC Real Investment Trust lost 9.91% to close at N5.
On the bright side, PZ Cussons Nigeria had the highest price increase, going up by 10% to close at N29.15. Juli followed with a gain of 9.93% to close at N3.10, and AXA Mansard Insurance went up by 1.53% to close at N5.30.”
Nigeria Aviation Handling Company’s stock went up by 0.69% to close at N29, while NPF Microfinance Bank’s stock gained 0.55% to close at N1.84. The total volume of shares traded increased by 41.28% to 396.228 million units, valued at N5.826 billion, and exchanged in 10,549 deals. The most traded stock was Transnational Corporation (Transcorp), with 52.567 million shares valued at N675.581 million. United Bank of Africa followed with 39.472 million
shares worth N823.933 million, and Access Holding traded 35.291 million shares valued at N620.906 million. Zenith Bank traded 30.925 million shares valued at N1.004 billion, while Universal Insurance transacted 23.322 million shares worth N8.111 million.”
