Interest rate hike: Investors ‘ll migrate financial assets away from equities, operators warn

Operators in Nigeria’s equities market have warned that most investors are likely to move their financial assets away from equities to money market instruments following the increase in interest rate to 16.5 per cent by the Central Bank of Nigeria (CBN) at its last Monetary Policy Committee meeting.

The Monetary Policy Committee of the Central Bank of Nigeria voted Tuesday to increase the benchmark interest rate by 100 basis points to 16.5 per cent, the highest since 2001.
The apex bank had increased the MPR from 11.5 per cent earlier this year to 15.5 per cent across three consecutive rate hikes.

According to the Managing Director of Crane Securities Limited, Mr. Mike Eze, when the interest rate is low, speculators move their funds from money market instruments to the stock market for higher yields.
And when the reverse is the case, they move from stocks to other asset classes, especially money market instruments.

Executive Vice Chairman of Hicap Securities Limited, Mr David Adonri, also agreed that when interest rates rise, investors tend to migrate to fixed-income securities.
He noted that the recent hike will negatively impact the market, especially on the equity side.

In his own submission, Chief Executive Officer at Wyoming Capital & Partners, Mr Tajudeen Olayinka, said the last three interest rate hikes by CBN have caused so much disruption to the market, as it is responsible for the prolonged repricing of securities across markets and instruments, including loans and advances by banks.