Stocks lose N519bn as CBN raises key interest rate

Nigeria’s equities market extended its decline on Tuesday as the Central Bank of Nigeria increased the monetary policy rate (MPR), the benchmark interest rate, to 13 percent from 11.5 percent, in a move to curb galloping inflation.

The nation’s stock market lost N519 billion or 1.82 percent, its largest daily dip so far this month. Guinness Nigeria Plc recorded the highest decline, as it lost N9.80 or 10 percent to close at N88.20 per share.

The 285th Monetary Policy Committee meeting of the CBN was concluded on Tuesday, and Godwin Emefiele, the governor, announced the committee’s decision at a press briefing.

Ahead of the announcement, analysts at Lagos-based United Capital had expressed their belief that the appropriate policy decision would be to raise the MPR. “First, aggregate price level is spiralling out of control, following the 90 basis points surge in April 2022 while inflation is expected to sit pretty outside the CBN’s comfort zone,” they said.

The Nigerian Exchange Limited (NGX) All-Share Index and market capitalisation decreased to 51,949.64 points and N28.006 trillion respectively on Tuesday, from the preceding day’s highs of 52,911.51 points and N28.525 trillion. The market’s positive return year-to-date decreased to 21.6 percent.

Ecobank Transnational Incorporated, Jaiz Bank, Access Holdings, UACN and Transcorp were the most traded counters on the bourse. In 6,096 deals, investors exchanged 720,192,027 units valued at N8.867 billion.

Read also: Bank stocks set to gain as Nigeria hikes interest rate for first time in 6yrs

Analysts at Lagos-based Meristem had on Monday, ahead of Treasury bills auction, expected further profit-taking on stocks that had recorded price appreciation in recent weeks, adding that as profit-taking activities dictated market direction, they expected the market to close in the negative region this week.

On Monday, the National Bureau of Statistics released the first-quarter 2022 GDP report, which showed that the Nigerian economy expanded by 3.1 percent in real terms, compared to 3.98 percent in Q4 2021.

“While we expect base effects to fade substantially in second-quarter 2022, we see upsides from the full reopening of the land borders, lifting of restrictions on SIM registrations, and pre-election spending. With crude theft being the driver of pipeline shutdowns and reduced oil production, we remain downbeat on the oil sector,” said Ibukun Omoyeni and Angela Onotu, analysts at Vetiva Capital Management in their recent note on Nigeria’s GDP.