Nigerian shares fell as much as 1.8 percent, their steepest drop since the beginning of the year, after the central bank’s monetary policy team took an aggressive stance, raising the benchmark interest rate to 13 percent.
The move could add considerably to the pressure on stocks in the short term, as the promise of better returns could entice portfolio managers to sell large volumes of stocks and invest the profits in fixed-income instruments.
Tuesday’s contractionary decision was taken not so much to rein in runaway inflation in Nigeria as to stem the flow of capital out of the economy to havens abroad that promised better returns, with Nigerian assets lose their appeal to foreign investors amid recent rate hikes by the US Federal Reserve and the European Central Bank.
Raising the interest rate is often effective in combating inflation driven by higher demand, not in addressing inflation induced by high costs and supply chain disruptions. the experts say.
UACN, MTN Nigeria and GTCO started the decline, while the consumer goods index took the biggest hit of the five sector indices tracked by the index.
Market breadthShowing the depth of investor sentiment towards the trade, it was negative as there were 39 losers compared to 17 advancers. The all-stock index shrank 961.9 points to 51,949.6, while the market cap closed lower at N28 trillion.
The index is up 21.6% since the beginning of the year.
TOP FIVE WINNERS
Japaul led the gainers, appreciating 10 percent to close at N0.33. Industrial and medical gases rose 9.89 percent to N10.
MRS rose to N16.40, posting 9.70 percent in the process. Abbey Building Society added 9.09 percent to end the trade at N1.80. Academy rounded out the top 5, rising 8.15 percent to N1.46.
TOP FIVE LOSERS
Guinness was the worst performing stock, falling 10 per cent to close at N88.20. Global Sectrum Energy lost 9.77 percent to close at N2.77.
Mansard fell to N2.04, losing 9.73 percent. WAPIC fell to N0.21, registering a depreciation of 8.70 percent. Veritas Kapital closed at N0.21, down 8.70 percent.
THE FIVE MAIN OPERATIONS
A total of 720.2 million shares estimated at N8.9 billion were traded today in 6,096 trades.
ETI traded 257.6 million units of its shares worth N3 billion traded in 77 deals. Jaiz Bank held 78 million shares, priced at N69.7 million trading hands in 77 transactions. Access Corporation traded 60.5 million shares valued at N605 million in 284 deals.
UACN traded 52.2 million shares estimated at N673.1 million in 79 transactions. Transcorp traded 31.4 million shares valued at N39.7 million in 205 trades.
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