NGX Declines as CBN’s Interest Rate Hike Dampens Investor Sentiment

The Nigerian Exchange Limited (NGX) closed last week in the red, as the stock market responded negatively to the Central Bank of Nigeria’s (CBN) recent interest rate hike. The Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) by 25 basis points to 27.5%, marking the sixth rate increase this year.

Key Market Highlights

1. Market Performance:
   • NGX All-Share Index (ASI): Declined by 0.3% week-on-week (W/W) to close at 97,507.87 points, down from 97,829.02 points.
   • Market Capitalization: Dropped by ₦64 billion, closing at ₦59.207 trillion, compared to ₦59.271 trillion in October 2024.
   • Year-to-Date (YtD) Returns: The market remains up 30.4% YtD, reflecting resilience despite recent declines.
2. Sectoral Performance:
   • Losers:
     • Oil & Gas: -1.9%.
     • Consumer Goods: -0.4%.
     • Banking: -0.3%.
   • Gainers:
     • Insurance: +1.2%.
     • Industrial Goods: +0.8%.
3. Top Movers:
   • Decliners:
     • Seplat: -6.0%, GTCO: -3.0%, MTN Nigeria: -1.2%.
   • Advancers:
     • WAPCO: +7.4%, Oando: +6.7%, FBNH: +3.5%.
4. Market Activity:
   • Trading Volume: Increased by 63.6% W/W.
   • Trading Value: Rose by 52.8% W/W.

Monthly and Long-Term Trends

• Month-on-Month (MoM): Marginal decline of 0.1%.
• Cumulative Impact: The market has been influenced by aggressive monetary tightening, with interest rates up 875 basis points in 2024.

Market Outlook

1. Cordros Research:
   • Anticipates cautious trading to persist due to the lack of major positive catalysts.
2. InvestData Consulting:
   • Expects mixed sentiments, driven by:
     • Investors digesting the impact of the latest rate hike.
     • Portfolio rebalancing, profit-taking, and bargain-hunting activities.

Key Takeaways

The NGX continues to navigate a challenging environment shaped by monetary tightening, fluctuating oil prices, and cautious investor sentiment. While the year-to-date gain of 30.4% underscores the market’s underlying strength, the immediate outlook remains mixed as traders weigh the implications of the latest rate hike.