CBN first rate cut since 2020 has triggered liquidity surge and stock market sell-off.
NewsOnline Nigeria reports that the Central Bank of Nigeria (CBN) has cut its benchmark interest rate by 50 basis points to 27 per cent, marking its first reduction since 2020 and sending ripples across financial markets.
The move, announced on Tuesday after five straight months of easing inflation through August, immediately lowered overnight lending rates but sparked a sell-off on the Nigerian Stock Exchange.
The Monetary Policy Committee (MPC) reduced the Monetary Policy Rate (MPR) to 27 per cent, adjusted the lending facility to 29.5 per cent from 32.5 per cent, and cut the deposit facility to 25.5 per cent from 26.5 per cent, signalling a shift towards looser monetary conditions.
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In response, overnight lending rates dropped by 100 basis points to 25.5 per cent as banking system liquidity swelled by N1.15 trillion to reach N3 trillion ($2.02 billion), Reuters reported.
However, equities faltered. On Wednesday, the All-Share Index (ASI) dipped by 213.50 points, or 0.15 per cent, closing at 140,716.10 points. The sell-off erased N136 billion from market capitalisation, which fell to N89.063 trillion.
Heavyweights including MTN Nigeria, Cadbury Nigeria, UACN, NAHCO, and May & Baker dragged the market down, despite gains from Dangote Sugar Refinery (+10%) and MeCure Industries (+9.95%).
Afrinvest analysts linked the bearish trend to a fixed-income versus equities trade-off, with investors shifting to safer fixed-income assets amid uncertainty.
Market breadth remained negative with 29 losers against 23 gainers. Turnover fell 41.7 per cent, with 442.56 billion units valued at N16.97 billion traded in 21,684 deals. Zenith Bank, Access Holdings, and FBN Holdings led activity.
Analysts say the dual impact of lower borrowing costs and investor caution highlights a fragile market balance. The next test will come from fresh inflation data, potential OMO issuances, and further central bank actions.
