Equity investors on the Nigerian Exchange Group (NGX) have experienced a reduction in their wealth following the hike in the nation’s Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) at its last MPC meeting held late March.
At the close of business on April 23, the market capitalisation of listed equities declined to N56.17 trillion compared to N59.12 trillion on March 28, 2024. This amounted to a loss of N2.95 trillion in equity value within the period.
The All-Share Index (ASI) of NGX also declined to 99,311.54 points, shedding 5,250.52 points within the period as against 104,562.62 points on March 28.
It should be recalled that at the MPC meeting of the CBN concluded on March 26, 2024, the CBN governor, Olayemi Cardoso, while reading the communique at the end of that meeting announced the policy decision of the CBN to the effect that the nation’s benchmark interest rate, was raised by additional 200 basis points to 24.75 percent,
“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,” Cardoso said.
The hike in rate is expected to influence a lot of investing decisions which will act as a nexus to ensure price stability in Nigeria.
Addressing investors last weekend, Meristem Securities, one of the leading investments cum research outfits in Nigeria, said the equity market was bearish for five consecutive weeks as of last Friday, while indicating that there was strong demand for fixed income instruments in the money market.
“The Nigerian equities market closed down for the fifth consecutive week, as the All-Share Index (NGXASI) recorded a 2.72% WoW decline to settle at 99,539.75pts. This brought the year-to-date return to+33.12%. Sector-wise, performance was predominantly bearish as all sectoral indices closed the week in the red zone.
“In the FGN primary auction held during the week, with an offering of NGN450 billion across three maturities: FGN 29, FGN 31, and FGN 34. Surprisingly, the total sales amounted to NGN626.81 billion, indicating strong demand. However, this auction showed a bid-to-cover ratio of 1.47x, significantly lower than the previous auction’s ratio of 7.77x, suggesting a decreased level of oversubscription.
“The stop rates for the different maturities were 19.30%, 19.75% and 20.00%, 19.75% for FGN 29, FGN 31, and FGN 34 respectively. In the secondary fixed-income market, sentiment was mixed. The average Treasury bills (T-bills) yield saw an increase, climbing to 20.03% from 19.33% in the previous week,” Meristem Securities said.
Afrinvest attributed the bullish sentiment in the money market to the investment preference for the primary mortgage auction in April.
“The domestic bond secondary market maintained a bullish dominance last week, as positive investor biases trailed the April FGN Bond PMA. As a result, average yield fell by 23bps w-o-w to 19.04% from 19.27% recorded in the past week.
“In detail, buy pressures were witnessed on the short- and mid-term instruments, as average yields dipped by 58bps and 32bps respectively. Specifically, the APR-2029 (67bps) and NOV-2029 (51bps) instruments witnessed the most buying interest at the short and mid ends,” Afrinvest said.
Year to date, the stocks whose share prices have appreciated include Geregu Power, 150.6 percent; Dangote Cement,105.3 percent; Seplat, 45.9 percent; Cornerstone Insurance, 37.9 percent; Ecobank, 24.4 percent; AIICO Insurance,27.5 percent; Airtel Africa, 16.6 percent; Ikeja Hotel, 21 percent, PZ, 42.3 percent; among others.
