…asymmetric corridor now +100/-300 basis points
The Central Bank of Nigeria (CBN) under its new management, continued its hawkish stance for the second time in a row this year. This follows the recent decision of the Monetary Policy Committee (MPC) to further increase the Monetary Policy Rate (MPR) at the end of its 294th MPC meeting held in the nation’s capital Tuesday.
The MPR, which is the nation’s benchmark interest rate, was raised by additional 200 basis points to 24.75 percent, up from 22.75 percent in February 2024.
“This move reflects the Central Bank of Nigeria’s (CBN) efforts to curb inflation and attract Foreign Portfolio Investment (FPI) inflows,” ARM Securities said in a note to investors.
The CBN also announced the retention of the Cash Reserve Ratio of deposit money banks at 45 percent, liquidity ratio at 30 percent but adjusted the asymmetric corridor from +100/-700 basis points to +100/-300 basis points. The CBN also raised the Cash Reserve Ratio of merchant banks in the country from 10 percent to 14 percent.
“The Committee’s decisions are as follows: Raise the MPR by 200 basis points to 24.75 per cent from 22.75 per cent, adjust the asymmetric corridor around the MPR to +100/-300 basis points, retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per cent, adjust the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to 14.0 per cent, retain the Liquidity Ratio at 30.0 per cent,” Cardoso said Tuesday.
“The considerations of the Committee at this meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability. These considerations underscore the importance of the CBN’s commitment to the price stability mandate and the need to urgently bring inflation under control to ensure that purchasing power of ordinary Nigerians is restored in the short to medium term,” he added.
Meanwhile, the effect of the new rate hike was felt instantly in the nation’s capital market. The market capitalisation of listed equities fell to N58.77 trillion as at the close of business on March 26, as against N58.87 trillion on Monday March 25, translating to a loss of N103.97 billion.
The All-Share Index (ASI), NGX’s bell weather metric, settled at 104,136.35 points Tuesday, compared to 104,647.37 points on Monday, down by 0.49 percent.
Tuesday’s top trades involved GT Holdings, 67.15 million shares; UBA, 51.47 million shares; Zenith Bank, 42.43 million shares; Access Holdings, 33.32 million shares and Fidelity Bank, 30.02 million shares.
Sub sectoral indices that declined at the end of Tuesday’s trading session include NGX 30 which declined by 0.22 percent; NGX Industrial Index, 0.01 percent; Meri-Telco 0.23 percent among others.
Twenty-five stocks depreciated in price; 100 equities remained neutral, while 27 appreciated in price at the end of Tuesday’s trading session.
Analysts are of the opinion that the current bearish run in the capital market will continue as investors take advantage of better returns in the fixed income market in response to the rate hike.
“Tomorrow, we anticipate an extended bearish run, as investors reassess the attractiveness of equity assets following further tightening by the MPC,” Afrinvest stated.
