The stock market on the Nigerian Exchange Limited, or NGX, has maintained upward momentum despite apparent speculation over the future of monetary policy as the Monetary Policy Committee, or MPC, of the Central Bank of Nigeria, or CBN, meets today.
The Monetary Policy Committee (MPC) will determine the new MPR, or Monetary Policy Rate, which serves as a benchmark for financial institutions setting interest rates on loans to consumers.
Given that inflation has been decreasing, some observers predicted that the CBN would keep the current rate in place in the meantime. The NGX All Share Index, or ASI, increased by 0.8% to close at 98,247.99 points last week from 97,456.62 points the week before, according to stock market activity.
Comparably, market capitalisation, another indicator of the performance of the stock market, increased by N455 billion to close at N56.466 trillion from N56.001 trillion the week before. The favourable performance of the market was reinforced by the strong demand for important equities like Geregu Power, which gained 15.00% Week on Week, WoW; Fidelity Bank (4.20%) and MTNN (3.95%) were next in line.
Analysts from Cordros Research commented on the MPC meeting, saying: “As with previous meetings, we expect the Committee to consider developments in the domestic and global economy since the last policy meeting.”
Major central banks around the world are loosening their monetary policies as headline inflation begins to approach goal levels.Nigeria’s GDP growth is still strong domestically, and headline inflation has decreased over the past two months.
Nonetheless, short-term pressures point to a possible spike because of the significant rise in PMS’s base price (+50.5% to NGN855.00/litre).We also highlight the CBN’s recent attempts to stabilise the naira in the face of ongoing demand pressure.
As a result, we anticipate the CBN to take a cautious approach and probably decide to keep the interest rate at its current level in order to promote economic stability. As a baseline, we anticipate that the MPC will maintain all other policy parameters while “HOLDING” the Monetary Policy Rate (MPR) at 26.25%.
“We expect mixed sentiment to continue as players reposition their portfolios ahead of quarter-end and Q3 earnings session in the midst of profit taking and bargain hunting in the hope of an inflow of the half-year numbers from the other interim dividend paying stocks, as sector rotation continues in the market,” InvestData Consulting Limited analysts said when discussing the market outlook.However, investors are still rearranging their portfolios, buying into value during pullbacks.
