Nigeria’s equities were still less attractive to most investors despite that the Central Bank of Nigeria (CBN) on Thursday cuts interest rate to 27 percent, its first time in five years.
The marker was down by 0.40 percent as investors sold stocks across board, led by banking, oil & gas and other major counters.
“This week, we expect the equities market to post modest gains driven by anticipation of MPC rate cut, strong H1: 2025 banks earnings and interim dividend positioning, all of which should strengthen sentiment and sustain demand for undervalued quality stocks”, Futureview research analysts said ahead of MPC meeting outcome.
Once the central bank decreases the interest rate, there’ll be a domino effect on other charges that banks levy on their customers. In turn, banks will charge consumers less for credit, and strengthen their spending power.
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Also, while lower rates make borrowing money cheaper, it encourages consumer and business spending and investment, and can boost stock prices.
This hasn’t happened yet at the NGX as its benchmark index dropped to 140,929.6 points while equities market capitalisation decreased to N89.198 trillion while all key sectoral indices closed in red.
In a bid to stimulate economic growth amid slowing inflationary pressure, the Monetary Policy Committee (MPC) of the CBN after a 2-day meeting unanimously reduced the MPR by 50bps to 27 percent.
The MPC also adjusted the asymmetric corridor around the MPR to +250bps/-250bps; reduced the CRR for commercial banks from 50 percent to 45 percent; retained the CRR of merchant banks at 16 percent; retained the liquidity ratio at 30 percent and introduced a 75 percent CRR on Non-TSA public sector deposits.