TRADING activity in the Nigerian stock market closed in the red on Monday, March 25, as the All-Share Index declined by 0.49 per cent to 104,136.35 points and the market capitalisation by N288.93 billion to close at N58.88 trillion as CBN commences March MPC meeting
Analysts believe this was not unconnected to investors’ reaction to the two-day monetary policy committee (MPC) meeting that started on Monday.
The meeting is expected to end today, Tuesday, March 26, as the 12-member committee makes another decision to rein in inflation.
After its first MPC in February, the committee raised the benchmark interest rate by 400-basis-point to 22.75 per cent and tampered with other parameters.
Read Also:
- With Adaora at Zenith, women now lead 11 of Nigeria’s 24 banks
- Dangote earns over 50% profit from every ₦1 cement sales
- Investors lose N1.83 trillion days after CBN’s new monetary policies
- Extra charges on withdrawal, deposit above half a million – CBN
- Thomson Foundation launches 2020 mobile journalism worldwide contest
Analysts had argued that the CBN committee’s decision would hurt the fragile economy already contending with numerous macroeconomic challenges. They also told The ICIR that the committee would likely raise the benchmark interest rate at its March meeting.
This seems evident as the country’s headline inflation has further jumped to 31.70 per cent as of February, which some analysts said had left the CBN committee with no choice but to tighten the benchmark rate and further impact investors’ confidence.
Monday’s trading activity reflected investors’ sentiment as total deals, volume, and value declined by 2.41 per cent, 39.27 per cent, and 20.04 per cent to 9,343, 306.82 million units, and N11.38 billion, respectively.
The banking and consumer goods indices also reflected the bearish sentiment, declining by 1.72 per cent to 992.84 points and 0.83 per cent to 1,613.01 points.
GTI research analysts attributed the negative sentiment to increased profit-taking observed in the market, adding, “It is projected, however, that the market will experience mixed sentiments for the remaining days of the week.”
The National President of New Dimension Shareholders, Patrick Ajudua, said investors were reacting to the negative sentiment of the MPC meeting that started on Monday.
He noted that since the resumption of the MPC under the current CBN governor, Olayemi Cardoso, an expected upward review of interest rates and other parameters had occurred.
“This results from inflationary pressures, which have seen inflation rise monthly. Therefore, a consistent upward review of these rates will continually attract negative sentiment, which could be more investor-friendly.
“These rates have further hampered the declaration of attractive dividends by banks, especially,” Ajudua told The ICIR.
He suggested that the committee hold on to existing rates while tackling the foreign exchange issues and other microeconomic challenges.
“This will improve investors’ confidence in better dividend payment and returns on investment,” Ajudua stated.