Nigeria: Equity Dealers Set for a Boost From MPR Reduction

2 June 2020

Dealing members of the Nigerian Stock Exchange, NSE, appear warming up for a fresh boost in market activities following the downward adjustment in the Monetary Policy Rate, MPR, by the Central Bank of Nigeria, CBN, last week.

Meanwhile, activities in the stock market maintained an upward streak at the beginning of trading yesterday as businesses make slow re-starts across all sectors post-lockdown. Consequently, investors gained N26 billion after the end of the day.

The market recorded 0.19 percent returns as the All Share Index (ASI) rose to 25,316.15 points from 25,267.82points, while the market capitalization of all equities moved up to N 13.194 trillion from N13.168 trillion on Friday, indicating 0.19 percent increase.

At the backdrop of the CBN's new MPR equity dealers and analysts said the new MPR at 12.5 percent which indicates more liquidity in the financial system, would re-direct more funds to the capital market.

The Monetary Policy Committee of the CBN had, in a bid to salvage the economy from the negative impact of the Coronavirus (COVID-19) pandemic last week, reduced the MPR by 100 basis points to 12.5 percent from 13.5 percent.

Speaking on its probable impact of this on equities, Mallam Garba Kurfi, Managing Director, APT Securities, stated that the reduction would translate to better returns to investors and increased activity in the market as more funds would be allocated to the market.

According to him, yields in the money market have already started trending downwards.

In his words: "The reduction of MPR already affected the OMO market yesterday (Thursday, May 28, 2020) as the market lost about 400 basis points. This, generally, is an indication that lower rates are expected in the money market and that will promote economic growth as more manufacturing companies will be able to borrow from the banks. "In April, the All Share Index rose by over 18 percent. With MPR at 12.5 percent, we expect better performance and more trading activities with better returns for investors."

Also, Mr. Ambrose Omorodion, an analyst at Invesdata Limited, explained that the MPC's action would push down yield in the money market, adding that low yield in money market instruments would re-direct some funds to the capital market.

He stated that investors would raise their stake in the equities market to hedge against inflation.

Meanwhile, National Aviation handling Company (NAHCo) and Japaul Oil and Maritime Plc led the gainers, advancing by 10 percent each to close at N2.75 and N0.22 per share respectively, while Fidson Healthcare Plc and Stanbic IBTC Holdings Plc led the laggards, dropping by 9.27 percent and 9.2 percent respectively.

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