Nigeria’s equities retreat amid market volatility, interbank rates surge

By Samuel Bankole

The Nigerian equity market ended Thursday in the red, with the All Share Index (ASI) declining by 0.34%, closing at 96,210.20 points.

The market capitalization dropped to N55.27 trillion from the previous session’s N55.45 trillion, marking a loss in equity value.

Trading volume saw 388.62 million units exchanged, valued at N9.57 billion across 9,897 deals. Market sentiment was bearish, with 29 stocks posting losses against 20 gainers. The NGX 30 Index, a key benchmark for large-cap stocks, fell 0.17% to 3,576.29 points.

Sterling Bank and Dangote Sugar were the only notable gainers, while Flour Mills and Nigerian Breweries led the decliners, reflecting the ongoing pressures on consumer goods and manufacturing sectors.

In the money market, overnight rates surged, with the Overnight (O/N) rate climbing 2.42 percentage points to close at 31.60%, while the Open Repo (OPR) rate spiked by 2.71 percentage points, settling at 31.10%. This sharp increase reflects tightened liquidity conditions in the interbank market.

Meanwhile, at the Investors and Exporters (I&E) FX window, the naira depreciated further against the U.S. dollar, with the exchange rate closing at N1,639.41 per dollar compared to N1,625.88 in the previous session.

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Persistent pressure on the naira remains a concern, driven by inflationary risks and capital outflows.

Background & Outlook:
The Nigerian equity market has experienced heightened volatility in recent months amid macroeconomic uncertainty, largely driven by government reforms, including the removal of fuel subsidies and the liberalization of the naira.

These policy shifts have spurred inflation and tightened liquidity, as reflected in rising short-term borrowing costs.

On September 4, the Central Bank of Nigeria (CBN) held a primary market auction, issuing Nigerian Treasury Bills (NTBs) worth N233.31 billion across 91-day, 182-day, and 364-day maturities.

The auction saw robust demand, oversubscribed by 384%, with bid-to-cover ratios of 2.13x, 1.70x, and 5.27x for the respective tenors. Stop rates fell across all maturities, signalling strong investor demand despite rising inflation risks.

Looking ahead, investors remain cautious amid the challenging macroeconomic environment, with concerns over inflation and currency depreciation likely to weigh on market sentiment.

However, continued demand for government securities may provide some stability in the near term, while further monetary policy actions by the CBN are anticipated to manage inflationary pressures.