Following the Central Bank of Nigeria’s (CBN) increase in the Monetary Policy Rate (MPR) to 26.75%, the Nigerian stock market saw a decline of N1.3 trillion, or 2.33%, in a week.
The market capitalization fell from N56.929 trillion to N55.605 trillion, and the NGX All-Share Index decreased by 2,337.91 basis points.
The rate hike, aimed at reducing liquidity and increasing credit costs, led investors to shift their focus to fixed income securities like Treasury Bills.
Experts noted that the new MPR adjustments, including increased statutory liquidity ratios and special deposit rates, could further tighten liquidity and negatively impact both the banking sector and equity markets.
Analysts pointed out that the MPR increase contrasts with the rate decisions of other African countries, which have generally maintained their rates.
They attribute the hike to Nigeria’s persistent high inflation, which has now reached 34.2% for the 18th consecutive month.
Source: This Day