CBN aggressive tightening ‘ll make fixed income attractive – Uwaleke 

An economist has said that aggressive tightening measures of the Central Bank of Nigeria (CBN) which manifest in a higher interest rates environment will make fixed income securities more attractive but shrink credit to the real sector of the economy.

Professor of Capital Market, Nasarawa State University Keffi, Professor Uche Uwaleke made this statement in Lagos at  “Arthur Steven Asset Management (ASAM) quarterly webinar tagged “Nigeria Economy and Capital Market Outlook in Second Quarter of 2024.”

He said in view of the reverse relationship between interest rate and equities market’s return, a major factor that will influence stock market performance in the second half of 2024 is CBN ‘s monetary policy stance.

He said given that the impact of monetary policy comes with a lag, it should be expected that the full effect of the pace and scale of policy rate hikes will hit the economy in the second half  of 2024.

He said although MPC is likely to pause rate hikes in the second half of this year following the inauguration of the Presidential Economic Coordination Council (PECC), the impact will be felt in the year 2025.

He said in its world economic outlook, the international Monetary Fund (IMF) had reduced Nigeria’s Gross Domestic Products (GDP) growth forecast from 3.3 per cent to 2.9 per cent in 2023  and 3.1 per cent in 2024 respectively while the 2024 federal government budget projected GDP growth  rate at 3.76 per cent.

He said the reality is that the challenging domestic business environment stemming from the high interest rate, high exchange rate and high cost of energy will continue to pose a drag to strong  GDP growth rate.

Uwaleke stated that nowhere will this be made more apparent than in the manufacturing and agricultural sectors where growth rates have steadily begun to tank according to the National Bureau of Statistics (NBS) first quarter 2024 report.

Against the backdrop, he said companies in the agriculture, industrial and consumer goods sectors may record depreciation in their share prices in the second half of 2024.

He pointed out that the influential members of the private sectors in the PECC such as Aliko Dangote, Abdul Rabiu (Chairman  of BUA Cement) will likely influence monetary policy in favour of economic growth.