Nigeria’s rate hike forces stock market to close week in red

Nigeria’s equities market closed the trading week ended July 22 in red after dipping by 0.45percent or N127billion week-on-week (WoW).

Investors began eyeing low risk assets as Nigeria’s Central Bank Monetary Policy Committee (MPC) hiked Monetary Policy Rate (MPR) to 14percent in move to curtail inflation.

The Bank’s hawkish decision makes investors rotate out of equities into fixed income investments to take advantage of the higher yield environment.

Though still above inflation (18.60percent), the stock market’s positive return year-to-date (YtD) printed lower at +21.69 percent on Friday.

As investors considered low risk assets classes in the review trading week, the market which had opened the week in green recorded four (4) consecutive days of negative closes, driven majorly by banking and consumer goods stocks.

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“With the current negative sentiments in the market, we are beginning to see stock prices of some companies back at their year-open price amid sell-off activities,” research analysts at Vetiva Capital said in their July 21 note.

The stock market’s performance indicators –All-Share Index (ASI) and Market Capitalisation – decreased from week-open highs of 52,215.12 points and N28.157trillion to 51,979.92 points and N28.030trillion.

The MPR increase by 100 basis points is its second straight raise this year. It is also the first time interest rate is raised in two successive MPC meetings under Central Bank governor, Godwin Emefiele.

Though, the MPC left the Cash Reserve Ratio (CRR) unchanged at 27.5 percent; Liquidity Ratio at 30 percent; and retained the asymmetric corridor of +100/-700 basis points around the MPR.