By Chinwendu Obienyi
Investor’ sentiment in Nigeria’s stock market remained weak as sell-offs in mid-capitalised stocks crashed investors’ wealth by N88 billion in two consecutive trading days.
The market had resumed the week on a bearish note as profit-taking activities underpinned Monday’s performance, driving the All-Share Index (ASI) down by 0.3 per cent. Tuesday’s session was not any different as the shares of WAPCO, Royal Exchange Plc and 10 others depreciated in value.
Consequently, the market’s index fell by 0.02 per cent to close at 43,808.25 points while market capitalisation dropped to N23.861 billion from the week’s opening value of N23.949 trillion.
This means that investors have now lost N88 billion in two days. According to market operators, the bearish theme of the stock market is down to weak macroeconomic headwinds in the country at the moment. They further added that Tuesday’s loss might be connected to investors reacting to news that the country’s inflation had hit 21.1 per cent last month.
According to the Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) yesterday, Nigeria’s inflation rate accelerated to a new 17-year high of 21.09 per cent in October 2022, marking a 0.32 per cent points increase from 20.77 per cent recorded in September 2022. The report revealed that food inflation also surged to 23.72 per cent in the review month from 23.34 per cent recorded in the previous month, while the core inflation rate rose to 17.76 per cent from 17.6 per cent.
Nigeria is passing through tough economic crisis in its history and there has been divided opinion as to whether
the persistent inflationary pressures are structural and largely imported.
Analysts say inflation is driven by dollar scarcity, high diesel cost and excess liquidity. The Central Bank Governor, Godwin Emefiele had switched in May from a loose monetary policy to support weak economic growth to a tight policy after inflation hit its highest level since 2005.
As a result of this, most analysts said they expect the CBN to hold the key rate at its current level of 15.50 per cent next Tuesday after hikes totalling 400 basis points so far this year, as it attempted to rein in inflation.
A market operator who preferred anonymity, said, “It is no surprise as to what is happening in the stock market today. This is more or less a reflection of what is happening in the economy. I also feel investors so far are not happy with what is happening which is why they are cautious in trading their stocks.
Inflation as reported is about 21 per cent and this is not a good news for the economy. The CBN had decided to raise rates to rein in inflation and I really did not expect it to have a quick impact. I feel when the next Monetary Policy Meeting (MPC) meeting takes place, they might decide to hold the rates”, he said.