Shift in Monetary, Fiscal Policies support stock market growth ~NSE Chief
With the current shift into a negative real interest rate environment as a result of The Central Bank of Nigeria (CBN) policy, more investors are now in search of investments that would give them higher yields and returns, the Chief Executive Officer (CEO) of the Nigerian Stock Exchange has said.
According to Oscar Onyema, the directive of the CBN that restricted domestic investors from participating in its open market operations (OMO) and the recent cut in its benchmark interest rate have driven influenced the performance of the local bourse.
Onyema, who spoke in Lagos noted that investors are always in search of higher returns on investments and because of the change in monetary policy the stock market has become attractive to investors.
“Since then, a number of policy changes have occurred. And as the world is now in a recovery mood and economies are opening up, we are seeing investors react to these policy changes. As you know, the markets are indicators of what would happen in the economy.
“So, the equities market is just reflecting that. I must say that some of the policy changes I made reference to include the CBN policy that domestic institutional investors should stop participating in the OMO market.
“That has driven significant funds into the Nigerian Treasury Bills (NTB) market and some of those funds have found their way into the equities market. We have also seen a cut in interest rate.
“That was a significant move in support of equities as an asset class. What investors tend to do is to look for yield.”
“Given the record dividend yield available in the Nigerian market and given the strong fundamentals of a number of companies that are listed on the Exchange, it makes sense that as investors try to rebalance their portfolio, they would look at equities.
“There have also been a number of fiscal policies that have been very supportive of the market
The NSE boss said the Nigerian economy has been impacted by the outbreak of the Coronavirus thereby creating some challenges in the economy.
He said the nation’s capital market was not spared from the impact of the pandemic as it has witnessed a lot of volatility, similar to other markets, since March when COVID-19 entered the country.