Emmanuel OchayiStock Market Defies CBN’s Interest Rate Hike
Nigeria’s stock market surprised analysts on Wednesday, continuing its upward trend despite the Central Bank of Nigeria’s (CBN) recent increase in the Monetary Policy Rate (MPR).
The market gained 0.42%, or N241 billion, at the close of trading, driven by strong performances from key companies like Flour Mills of Nigeria and Seplat Energy.
Join our WhatsApp ChannelFlour Mills of Nigeria saw a significant boost after announcing a plan for its majority shareholder, Excelsior Shipping Company Limited, to buy out minority shareholders. This news drove its stock price up by 10%, closing at N60.50 from N55 the previous day.
Interest Rate Hike Aimed at Inflation Control
On Tuesday, the CBN’s Monetary Policy Committee (MPC) concluded its two-day meeting with a surprise decision to raise the MPR by 50 basis points to 27.25%, marking the fifth rate hike this year.
The central bank is using this strategy to curb inflation and stabilize the naira.
“The rate hike was necessary to combat inflation, but we did not expect such a strong stock market reaction,” said an investment analyst at Stanbic IBTC. Many market participants had anticipated a more subdued response due to the tightening monetary policy.
However, contrary to expectations, the stock market showed resilience, as investors remained confident. Flour Mills and Seplat Energy, in particular, led the market rally. Seplat Energy’s shares also rose by 10%, increasing from N3,730.10 to N4,103.10.
Banking Stocks Among Most Traded
Despite the interest rate hike, the banking sector continued to see heavy trading. Shares of Fidelity Bank, FBN Holdings, Transcorp, UBA, and AXA Mansard were among the most traded stocks on Wednesday.
Over 603 million shares worth N12.575 billion were exchanged in 9,723 deals, highlighting the ongoing investor activity in the sector.
READ ALSO: Nigeria’s Stock Market Rises By 0.18% Despite CBN Interest Rate Hike
“Investors are still digesting the implications of the rate hike,” said a market participant. “We expected a slowdown, but the market continues to show strength, particularly in banking and energy stocks.”
Stock Market Continues Upward Movement
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) increased from 98,568.59 points on Tuesday to 98,987.42 points by the end of Wednesday’s trading session. Market capitalization also rose from N56.640 trillion to N56.881 trillion.
Seplat Energy’s strong performance was attributed to its ongoing expansion and strategic investments in Nigeria’s energy sector. “Our focus is on delivering value to shareholders through consistent growth,” a Seplat Energy spokesperson said.
Analysts Expect Further Gains
Despite the CBN’s tightening measures, analysts believe the stock market may see further gains as investors find opportunities in key sectors like energy, banking, and manufacturing.
“The stock market is defying expectations, and we may continue to see upward movement in the coming days,” a financial expert stated. “The strong performance by Flour Mills and Seplat Energy is an encouraging sign for other companies.”
However, some analysts caution that the impact of the rate hike may still be felt in the long term. “There may be a delayed reaction to the higher interest rates,” said an economist. “While the market is currently optimistic, we should watch for potential corrections in the coming weeks.”
For now, Nigeria’s stock market continues to climb, driven by investor confidence and strong performances from key players, even in the face of monetary tightening.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
