Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ulThe Nigerian stock market experienced a drop of N1.49 trillion over two days due to an increase in interest rates. The Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) from 18.75% to 22.75% on Tuesday, which led to a negative sentiment among investors who are now redirecting their investments to the fixed income market. As a result, the stock market saw a sell-off in fundamental stocks, causing a drop of N773 billion on Tuesday.
The negative sentiment continued on Wednesday, leading to a drop of N720.57 billion in market capitalization to N54.317 trillion, resulting in a total loss of N1.49 trillion over two days. The MPC also increased the asymmetric corridor to +100 basis points/-700 basis points and the Cash Reserve Ratio (CRR) to 45% from 32.5%, while retaining the liquidity rate at 30%. Olayemi Cardoso, the CBN Governor, stated that the committee’s decisions were based on inflationary and exchange rate pressures, projected inflation, and rising inflation expectations. The rise in fixed-income yields has reduced interest in equities, particularly among domestic institutional investors. The MPC’s unexpected 400bps hike in the MPR is expected to have a further negative impact on the equity market’s short-term performance.
This is because rising fixed income yields typically reduce the appeal of equities, leading investors to opt for safer assets. Hence, we anticipate a prolonged bearish market trend driven by yield movements and uninspiring corporate earnings reported thus far. The share prices of Guaranty Trust Holding Company Plc, Zenith Bank Plc, and United Bank for Africa (UBA) among others declined, causing GTCO’s share price to drop by 8.86%, while Zenith Bank’s share price dropped by 8.07%. Additionally, UBA’s stock price closed trading on Wednesday at N20.50 per share, a decline of 13.9% from N23.80 per share it opened for trading this week.lamcorper mattis, pulvinar dapibus leo.