The Nigerian Exchange Limited (NGX) closed last week in negative territory as the stock market reacted to the Central Bank of Nigeria’s (CBN) decision to increase interest rates. This marks the sixth consecutive rate hike in 2024, reflecting ongoing efforts by the apex bank to manage inflation and stabilize the economy.
CBN Raises Interest Rate to 27.5%
The Monetary Policy Committee (MPC) of the CBN increased the Monetary Policy Rate (MPR) by 25 basis points, moving it from 27.25% to 27.5%. This brings the total rate increase for the year to a staggering 875 basis points, compared to just 225 basis points in 2023. The cumulative effect of these hikes has begun to weigh heavily on market sentiment, as investors become increasingly cautious.
Stock Market Reacts: NGX Declines
In response to the rate hike, the NGX All-Share Index (ASI) fell by 0.3% on a week-on-week (W/W) basis, closing at 97,507.87 points, down from 97,829.02 points in the previous week. The market’s negative performance was largely driven by sell-offs in major stocks, including:
- Seplat: Down by 6.0%
- GTCO: Fell by 3.0%
- MTN Nigeria: Dropped by 1.2%
However, some stocks bucked the trend, posting gains:
- WAPCO: Up by 7.4%
- Oando: Gained 6.7%
- FBN Holdings (FBNH): Rose by 3.5%
Mixed Sectoral Performance
The week saw a mixed performance across various sectors:
- Oil & Gas: Declined by 1.9%
- Consumer Goods: Dropped by 0.4%
- Banking: Fell by 0.3%
- Insurance: Increased by 1.2%
- Industrial Goods: Gained 0.8%
Despite the overall decline, market activity remained robust, with trading volume rising by 63.6% W/W and trading value increasing by 52.8% W/W.
Monthly and Yearly Trends
On a month-on-month (M/M) basis, the market saw a marginal decline of 0.1%, with investors losing about N64 billion. The total market capitalization stood at N59.207 trillion as of Friday, compared to N59.271 trillion at the end of October.
Year-to-date (YTD), however, the market has posted a solid gain of 30.4%, reflecting a generally positive trend for 2024 despite recent volatility.
Outlook: Cautious Trading Ahead
Analysts predict that cautious trading will persist in the coming weeks. According to Cordros Research, the absence of significant positive catalysts may continue to dampen investor sentiment. Meanwhile, InvestData Consulting Limited expects mixed sentiments as investors digest the latest rate hike. They anticipate a blend of profit-taking, bargain hunting, and strategic positioning by “smart money” as the year draws to a close.
The market’s future performance will likely depend on developments in monetary policy, economic indicators, and corporate earnings, all of which will play critical roles in shaping investor behavior.
