Rate Hike by CBN May Influence Direction of Capital Market—PwC

September 1, 2022
Capital Market Developments

By Aduragbemi Omiyale

The decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to increase the Monetary Policy Rate (MPR) to 14 per cent in July 2022 from 13 per cent may impact the capital market.

This was the submission of PwC Nigeria in its latest Nigerian Capital Market Update report for the first half of this year.

In the report, the reputable organisation said the action will also present an opportunity for corporate companies to approach the capital market to get funds for their operations.

However, he noted that the rake hike will likely force some investors out of the market temporarily as they source investment tools that will offer them higher yields.

“The recent increase in MPR may influence the direction of the market. However, as institutional and retail investors seek higher real returns, an avenue exists for corporates to access funding from the corporate debt market,” PwC said in the report.

It also warned that the 2023 general elections could have a negative effect on the capital market over uncertainties as investors want to tread cautiously.

“Although the results of the upcoming elections are uncertain, this might play a role in investor sentiments across all markets,” another part of the report stated.

The company made an analysis of key transactions in the capital market in the period under review, saying that about N235 billion was raised through the issuance of corporate bonds.

Of this, Dangote Cement Plc sold N116 billion worth of bonds in May 2022, the largest corporate bond sales in Nigeria.

Also, in the first half of the year, the Nigerian capital market witnessed the sale of commercial papers valued at N500 billion.

In the first six months of 2022, the nation’s stock market appreciated 21.3 per cent on a year-to-date basis despite the harsh macroeconomic challenges, including high inflation.

Aduragbemi Omiyale

Aduragbemi Omiyale is a journalist with Business Post Nigeria, who has passion for news writing. In her leisure time, she loves to read.

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