Nkiruka Nnorom

Equity investors have lost as much as N924 billion in 20 trading days since January 24, 2020 when the Central Bank of Nigeria (CBN) raised banks’ Cash Reserve Ratio (CRR) by 500 basis points to 27.5 percent from 22.5 percent in a bid to curtail inflationary pressure and rising liquidity in the system.

The equities had galloped by 12.4 percent between October 25, 2020, and January 24, 2020, due to the CBN’s policy directive that barred local investors from participating in Open Market Operations (OMO) Treasury Bills (TBs) auction.

However, the increase in the CRR by the CBN reversed the trend resulting in the bearish sentiment currently being witnessed in the market.

CRR is the share of a bank’s total deposit to be maintained with the apex bank in the form of liquid cash.

Vanguard analysis shows investors’ wealth declined to N 14.338 trillion as at the close of trading on Wednesday from N15.262 trillion at the commencement of the CRR increase, indicating a six percent decline.

Also, the All-Share Index declined to 27,523.08 points from 29,628.84 points on January 24, indicating a negative return of 7.1 percent.

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Already, the market has gone down by N118 billion or 0.81 percent between Monday, February 17 and Wednesday, February 19, 2020.

Mallam Garba Kurfi, Managing Director/CEO, APT Securities, and Fund, who affirmed that the equity market has been sliding since the monetary policy committee adopted the measure, said the move would lead to an increase in the interest rate in the money market.

Recall that interest rate in the money had taken a hit with the Open Market Operation (OMO) policy, leading to a fall in rate to as low as four percent.

Kurfi, however, said: “Interest in the money market has increased from less than five percent to seven percent and even more since the increase in CRR, which has made many institutional investors to move from equity to money market. This has made the capital market to keep going down since the announcement of the increase.”

Vanguard