NIGERIA’S stock market recorded a negative performance in the past week as investors lost N1.83 trillion during the five-day trading session in reaction to the latest Central Bank of Nigeria (CBN) decision on monetary policy tightening to curb inflation.

After its two-day monetary policy committee (MPC) meeting on Tuesday, February 27, the CBN raised the benchmark interest rate by 400 basis points to 22.75 per cent and cash reserve ratio (CRR) to 45 per cent.

The rate hike, which some analysts said was the right call, and others described as an overkill in taming inflation, which surged to 29.90 per cent in January this year, largely influenced investors’ sentiments in the last trading week.

As a result, the All-Share Index (ASI) and market capitalisation declined by 3.27 per cent to close the week at 98,751.98 points and N54.04 trillion, respectively.

On Monday, February 26, the ASI, which opened at 102,088.30 points, dropped to 101,995.53 points, while the market capitalisation declined from N55.86 trillion to N54.04 trillion to start the week’s trading in the red.

The negative performance continued on Tuesday and Wednesday as investors reacted to the outcome of the CBN rate hike, which led to sell-offs across mid and large-capitalised stocks in the banking, insurance, and consumer goods sectors, contributing to the downward trend.

The equities market rebounded on Thursday to record the only positive performance in the week.

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But on Friday, March 1, the stock market shed 1.23 per cent, the ASI to 98,751.98 points, and the market capitalisation to N54.04 trillion, respectively.

Analysts said the N1.83 trillion, mainly due to the CBN rate hike, indicated that investors were rebalancing their portfolios and shifting to take positions in the fixed-income market.

“Seeing market corrections after a bearish trend over weeks is not surprising. Investors are now trying to take a position in fixed assets owing to effective implementation of fiscal policies as contained in the budget and government desire to engage the private sector in most of the privatisation process,” the National President of New Dimension Shareholders, Patrick Ajudua, told The ICIR.

According to him, the rate hike in the CRR to 45 per cent will constrain quoted companies from declaring favourable dividends to shareholders.

“Shareholders are not pleased with the hike in monetary policy rate, which we all anticipate owing to an increasing rate of inflation and increase in CRR, which often limit the ability of the bank to function effectively and give a generous dividend to shareholders.

“So for us, we will not be anticipating any increase in banks’ previous year dividend declaration due to increase in CRR, inflation and anticipated capitalisation process,” Ajudua said.

Hoping that investors could find comfort from the financial institutions, he cast doubt on companies in the manufacturing and industrial sectors, pointing out that the naira devaluation had strained the financial performances.

“As investors, we hope for better banking and other financial sectors results.

“We have less hope from the industrial and manufacturing sector owing to the catalytic effect of the devaluation of the naira, which has seen most of them reporting losses in their unaudited statement with the attendant consequence of foreign exchange losses eroding off the shareholders’ fund,” he added.

An operator in the capital market, David Adonri, corroborated Ajudua’s view that the CBN rate hike contributed to the downward slope of the equities market in the just concluded week.

He said, “Apparently, the market was already primed towards reacting to further tightening the monetary policy. So, equities, especially banking stocks, started declining a few days before and after the policy was adjusted.

“The woeful performance of some listed companies at year-end and meagre dividend yield for others whose results have been released elicited negative backlash from investors, causing equities to close on a negative note at the end of the week.”

David, the executive vice chairman of Highcap Securities Limited, explained that once a price-sensitive event hits the market, equities react until the appropriate correction occurs.

“Since Thursday, the banking sector has been recovering, which may serve as an impetus for normalising market conditions,” he added.

Anticipating how the equities market would trade in the coming week, analysts at Cowry Asset Management stated in their weekly market report that a gradual return of positive investor sentiment was likely and that companies’ corporate earnings would drive it.

“However, the high-interest environment resulting from the recent policy rate hike by the CBN to 22.75 per cent and rising yields in the fixed-income market will likely influence investor behaviour.

“Regardless, investors are expected to continue rebalancing their portfolios as they carefully assess Nigeria’s macroeconomic data,” the analysts added.

Meanwhile, a total turnover of 1.882 billion shares worth N34.15 billion in 48,464 deals was traded at the floor of the Nigeria Exchange Limited (NGX) in the review week, compared to a total of 1.377 billion shares, valued at N31.584 billion in 42,040 deals in the previous week.

The financial services industry (measured by volume) led the activity chart with 1.275 billion shares valued at N20.427 billion traded in 24,801 deals and contributed 67.78 per cent and 59.82 per cent to the total equity turnover volume and value, respectively.

Transnational Corporation, United Bank for Africa, and Access Holdings accounted for 563.139 million shares traded, worth N10.155 billion in 9,270 deals and contributing 29.93 per cent and 29.74 per cent to the total equity turnover volume and value, respectively.