…As Experts attribute MPC rates’ retention to depleting external reserves***
Trading on the Nigerian Stock Exchange (NSE) rallied on Thursday following renewed positive sentiment in banking and oil and gas stocks, rewarding investors with N17 billion, as the market capitalisation closes at N12.947 trillion compared with N12.930 trillion recorded on Wednesday.
Specifically, the All-Share Index which opened at 26,790.10 increased by 34.40 points or 0.13 per cent to close at 26,824.50.
The uptrend was impacted by gains recorded in large and medium capitalised stocks, amongst which are; Cadbury Nigeria, Glaxo Smithkline Consumer Nigeria, UACN, FBN Holdings and Oando.
Consequently, market breadth closed positive, with 19 gainers against losers.
Cadbury led the gainers’ chart in percentage terms, appreciating by 10 per cent to close at N9.90 per share.
Cutix followed with a gain of 9.72 per cent to close at N1.58, while GlaxoSmithkline rose by 9.65 per cent to close at N6.25 per share.
Union Diagnostic garnered 9.09 per cent to close at 24k, while UACN appreciated by 7.14 per cent to close at N7.50 per share.
On the other hand, C &I Leasing led the losers’ chart in percentage terms, dropping by 9.85 per cent to close at N5.95 per share.
Jaiz Bank followed with a loss of 8.70 per cent to close at 63k, while Livestock Feeds dipped 7.27 per cent to close at 51k per share.
Afromedia dropped 5.56 per cent to close at 34k, while Dangote Sugar Refinery shed 4.83 per cent to close at N13.80 per share.
However, the total volume of shares traded closed higher with an exchange of 303.82 million shares worth N1.72 billion traded in 3,151 deals.
This was in contrast with a turnover of 189.86 million shares valued at N1.48 billion exchanged in 3,410 deals on Wednesday.
Law Union & Rock Insurance topped the activity chart with 151.70 million shares worth N91.32 million.
United Bank for Africa accounted for 20.36 million shares valued at N142.61 million, while Access Bank traded 12.37 million shares worth N111.67 million.
Mutual Benefits Assurance traded 11.09 million shares valued at N2.23 million, while Zenith Bank transacted 10.37 million shares worth N193.13 million.
Meanwhile, financial experts on Thursday said that the Monetary Policy Committee (MPC’s ) decision to retain all rates was aimed at protecting the nation’s external reserve being threatened by oscillation in oil prices.
The experts said this in Lagos, while reacting to the outcome of the last MPC ‘s meeting for the year.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd, said that the members voted to maintain status quo in order to protect the country’s external reserve.
“MPC members voting to retain status quo was to protect the nation’s external reserve that is already declining due to oscillating oil price in the international market,’’ Omorodion stated.
He said that a cut in rate would trigger off in all the investment windows.
According to him, MPC’s decision is in order to monitor wave of economic events between now and early 2020.
He added that the MPC’s decision was in line with analysts’ anticipation.
“MPC will not cut rate now that unconventional CBN policies and directives have started yielding positive results as the Q3 GDP came out stronger at 2.28 per cent against national economic growth of 1.94 per cent in Q2’’, he said.
Also speaking, Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun said that the outcome was in line with the existing economic realities.
Tella said that the rates were retained because the apex bank’s inflation target was threatened by latest rise in prices as released by the National Bureau of Statistics (NBS).
The professor said that it was better to keep the rates in order to give room for credit creation for economic growth and development.
“Since the economy is attempting to expand, the credit is likely to go for production rather than consumption,’’ he said.
Tella said that the country’s external reserve was being depleted to protect value of the naira.
He, however, noted that foreign inflow from Nigerians abroad ahead of Yuletide celebration would help in stabilising the exchange rate for the rest of the year.
“The reserve is being depleted to protect the value of naira but we should expect some inflow from Nigerians abroad who will be coming home for holidays and demand for oil to meet winter needs.
“The inflows will soon keep the exchange rate improving and stable for the rest of the year.’’
However, analysts at Cordros Capital Ltd., said that there would be limited scope for rate adjustment over first half of 2020.
They expressed optimism that there would be rate adjustments during the period due to continued depletion of the foreign reserves and uptick in inflation.
The MPC of the apex bank at the meeting which ended on Tuesday retained the Monetary Policy Rate (MPR) at 13.5 per cent.
Mr Godwin Emefiele, CBN Governor, said the committee unanimously voted to retain the MPR after the rates were reduced to 13.5 per cent from 14 per cent in March 2019, the first time the MPR was reduced since July 2016.
Mr Emefiele said that the committee reviewed the upside and downside options to either tighten, hold or loosen and decided to hold policies at its current position.
“The MPC reviewed the upside and the downsides of the options to tighten, hold or to loosen.
“The committee felt that there would be more gains in the shortfall to medium term in holding policy at its current position.
“The committee decided by unanimous votes to retain the policy rate at 13.5 per cent and to hold all other policy parameters constant,’’ Emefiele said.