Investors in the Nigerian equities market faced a significant setback in February, with an estimated loss of approximately N650 billion. The downturn, attributed to profit-taking activities and concerns over a record-high interest rate hike, marked a challenging month for the domestic bourse.
On February 29, 2024, the Nigerian equities market witnessed a substantial downturn, with investors grappling with an estimated loss of around N650 billion. The market turbulence stemmed from heightened profit-taking activities and apprehensions following an announcement from the Central Bank’s monetary policy committee.
The committee’s decision to raise the monetary policy rate to a record high of 22.7%, up from 18.75%, sent shockwaves through the market, intensifying selling pressure and dampening investor sentiment. Consequently, the local bourse saw a decline of 1.16%, with the benchmark index settling at 99,980.30 points.
This drop below the critical 100,000-point threshold marked a significant milestone, as the NGX All-Share Index concluded the day at 99,302.57 points, contrasting starkly with its recent peak of 105,722.78 points recorded on February 16th.
Market analysts attribute this downturn to a combination of factors, including investors capitalizing on profits from the recent bullish rally and concerns over the impact of the interest rate hike on market dynamics. The decision to increase the monetary policy rate prompted investors to reevaluate their investment strategies, with many shifting focus towards fixed-income securities for stability and higher returns.
The performance of the Nigerian equities market throughout February reflects the challenges faced by investors amid evolving market conditions. The All-Share Index, which opened the trading month at 101,154.46 index points, closed at 99,980.30 points, indicating a loss of 1,174.16 basis points or 1.16%. Similarly, activities on the Nigerian Exchange Limited (NGX) saw a month-to-date loss of approximately N650 billion, with market capitalization declining from N55.357 trillion to N54.707 trillion.
Market experts, including Mike Eze, Managing Director of Crane Securities Limited, and David Adonri, Executive Vice Chairman of Hicap Securities Limited, have weighed in on the situation. Eze emphasized the impact of profit-taking activities and the interest rate hike on investor behavior, predicting a shift towards fixed-income instruments. Adonri echoed similar sentiments, highlighting the potential negative implications of rising interest rates on the equity market’s recovery trajectory.
The Nigerian equities market faces uncertainties ahead as investors navigate evolving market dynamics amidst a backdrop of economic challenges and policy developments.
The Nigerian equities market grappled with significant challenges in February, experiencing a substantial loss of around N650 billion. Factors such as profit-taking activities and concerns over a record-high interest rate hike contributed to the market downturn. As investors reassess their strategies in response to evolving market conditions, the road ahead remains uncertain for the domestic bourse.
Credit: Nairametrics
