Rising interest rates cut investors’ wealth by 780 billion naira – The Sun Nigeria

By Chinwendu Obienyi

The The increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) to 14% from 13% at its last Monetary Policy Committee (MPC) meeting has recorded a negative impact on the Nigerian stock market with the decline in investor wealth to 782 billion naira at the end of July 2022.

Daily Sun investigations revealed that the fall in value and size of companies listed on the Nigerian Exchange Limited (NGX) stemmed from the Central Bank of Nigeria, MPR decision which forced investors to divest from the market fixed income securities where the interest rate was much higher. attractive.

According to its key performance indicators on the NGX, the All Share Index (ASI) fell 2.82% to close at 50,370.25 points from 51,829.67 points at which it opened trading for the month.

Meanwhile, the market capitalization for the period under review fell from 782 billion naira to 27.163 trillion naira from 27.945 trillion naira. In July, the market had also witnessed weeks of investor sentiment trading amid corporate earnings for the first half (H1) of 2022 by fundamental companies.

Although Monday’s session started the new August 2022 trading month on a bearish note, Tuesday’s 1.35% rebound due to the release of more H1 2022 earnings brings optimism, the market will return to positive territory as investors seek bargains in fundamentally sound stocks. with a consistent history of interim dividend payments.

Analysts at Cordros Research said: “Notwithstanding, we expect intense selling pressure on stocks of companies that grossly underperform in the first half of 2022. Overall, we reaffirm the need to position ourselves only in stocks fundamentally sound, as the weak macro environment remains a significant headwind for corporate earnings. .

For its part, a securities company merchant at APT Securities and Funds Limited, Jamiu Mohammed, noted that the market’s performance was driven by the rising MPR in the economy.

According to him, “what this implies is that whatever the rate is in the market, it will have a negative or positive impact on what happens in the equity market. This is why we have also seen investors shift to a risk-free environment and opt for fixed income instruments”.

While saying the rate in the fixed income market is out of step with 18% inflation in the economy, Mohammed said a 17% year-to-date gain for the stock market is not bad at all despite the 3% cent loss in the market last week.

Stephen V. Lee