The aggressive monetary policy tightening by the Central Bank of Nigeria (CBN), which has pushed the monetary policy rate (MPR) by four per cent from N18.75 per cent to 22.75 per cent to tame rising inflation is taking a huge toll on the stock market as investors fortunes plunged by over N1.4 trillion in two trading sessions.
The capitalisation of listed equities, which stood at N55, 810 trillion on the eve of the pronouncement on Monday, February 26, depreciated by N1, 493 trillion (in two trading sessions) to close at N54, 317 trillion yesterday.
Similarly, the All-share index of the Nigerian Exchange Limited (NGX), which measures the performance of listed equities also dipped by 2,729.51 points or 2.7 per cent from 101,995.53 to 99,266.02.
Indeed, the rate hike, which came eight months after the last MPC meeting in July 2023, and the highest since 2007, did not go down well with market activities as virtually all the blue chip stocks have continued to record price depreciation since after the pronouncement.
For instance, at the close of transactions on Tuesday, 27 stocks depreciated in price while 12 others constituted the losers chart. The situation worsened yesterday, amid massive selloff across sectors, causing 52 stocks to join the league of losers, against five others that made up the gainers chart.
Operators said the development has triggered a ‘wait and see’ mood in the market. According to them, investors are currently waiting to confirm market direction before jumping in, as outlook for the economy remains uncertain.
Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, said investors would continue to react negatively to the seeming mismatch of policies by the fiscal and monetary authorities that are evidence in the rising macroeconomic headwinds.
“As end to the situation is not insight due to the triple evils of naira devaluation, imported inflation and lingering insecurity, among others. These factors would continue to weaken the purchasing power of Nigerians, wiping out their entire savings. Even when the rate hike is to encourage savings that leads to investing,” Omordion stated.
Head Research, FSL Securities, Victor Chiazor, said the upward adjustment is expected to slow down the flow of capital towards the equities market, as the flight to safe investments at considerably higher yields will be significant enough to suck liquidity from the equities market to the fixed income market.
Meanwhile yesterday’s negative performance was driven by price depreciation in large and medium capitalised stocks which are; Dangote Sugar Refinery, Lafarge Africa, Guaranty Trust Holding Company (GTCO), Nigerian Breweries and FBNH Holdings (FBNH).
FCMB Group, Lafarge Africa, Nigerian Breweries, Oando, Red Star Express, Wema Bank, The Initiates Plc (TIP) and Sterling Financial Holdings Company led the losers’ chart by 10 per cent each to close at N7.20 kobo, N31.95 kobo, N30.60 kobo, N9.90 kobo, N3.42 kobo, N7.02 kobo, N1.80 kobo and N4.14 kobo respectively.
FBNH followed with a decline of 9.97 per cent to close at N27.55 kobo, while UPDC Real Estate Investment Trust lost 9.91 per cent to close at N5.
PZ Cussons Nigeria recorded the highest price gain of 10 per cent to close at N29.15 kobo. Juli followed with a gain of 9.93 per cent to close at N3.10 kobo and AXA Mansard Insurance up by 1.53 per cent to close at N5.30 kobo.
Nigerian Aviation Handling Company rose by 0.69 per cent to close at N29, while NPF Microfinance Bank gained 0.55 per cent to close at N1.84 kobo.
The total volume traded rose by 41.28 per cent to 396.228 million units, valued at N5.826 billion, and exchanged in 10,549 deals. Transactions in the shares of Transnational Corporations (Transcorp) topped the activity chart with 52.567 million shares valued at N675.581 million.
United Bank for Africa (UBA) followed with 39.472 million shares worth N823.933 million, while Access Holdings 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 23.222 million shares worth N8.111 million.
