Some operators in the Nigerian Stock Exchange have decried the effect of the recent increase in Monetary Policy Rate (MPR) on the stock market just as the equity market in response to the development had depreciated by N152 billion five days after the hike.
The Central Bank of Nigeria, had on Monday increased the interest rate benchmark, the Monetary Policy Rate (MPR) to 12 per cent as it raised Cash Reserve Requirement (CRR) to eight per cent.
The increase was in response to the apex bank’s concern about the unusual developments in the global and domestic economies, with potential negative impact on domestic liquidity conditions and renewed threats to price and exchange rate stability.
While urging government to reconsider its decision on the increase, they argued that there would be a sustainable massive sell-off of shares in the equity market as investors were already taking position by migrating to the money market.
According to them, the hike in the rate at this time has impaired recovery prospects of the equity market especially the selling pressures that will also characterise the yuletide? season.
Reacting to the development, the Registrar/Chief Executive, Chartered Institute of Capital Market Registrars, Mr. Walter Ogogo, said, “the impact on the capital market is very simple; it means that the interest rate is on the increase and if someone wants to put his money on fixed deposits or money market, that person should be able to get something better in terms of interest.
“The motivation is that most persons will want to sell-off their shares and put the money in either fixed deposits or in money market instrument where the interest will be better, that will mean profit taking by the investors in the market which will further depress the market.’’
He urged the apex bank to reconsider its decision on the issue.
“ The market will come back gradually because what I know is that the economic team of the federal government? is good enough to make the positive change that is needed. But the CBN’s recent pronouncement shows that they are temporarily thinking of the value of the naira, they are not thinking of the average investor in the capital market? and we are in an economy where whatever you do in one side affects the other.