By Kayode Tokede
The Chief Executive Officer of the Nigerian Stock Exchange, Oscar Onyema has said various intervention of Central Bank of Nigeria’s (CBN) to check the negative impact of the coronavirus pandemic has attracted investment into the equities markets.
Onyema made the disclosure while counting the gains of the policy measures adopted by the CBN in the battle against COVID-19.
With Gross Domestic Product contracting by 6.1 per cent and inflation climbing 13.22 per cent, the Central Bank revised interest rate to 11.5 per cent to offset the economic losses from the GDP and inflation figures.
Similarly, the apex bank had restricted individuals and local corporates from investing in Open Market Operations auctions.
The COVID-19 induced drop in oil prices affected the country’s foreign exchange earnings and weakened investments across the different sectors of the Nigerian economy.
But the CBN adopted a currency restriction policy to sustains it’s forex shortfalls.
“A number of policy changes have occurred and as the world is now in a recovery mode, and economies are opening up, we are seeing investors react to these policy changes and as you know the markets are forward indicators as to what will happen in the economy,” Onyema said.
He said the significant policy changes which barred domestic institutional investors from participating in the OMO markets has driven significant funds into the treasury bill market.
“Some of those funds have found their ways into the equity markets,” Onyema said.
The NSE boss said, “We have also seen a cut in interest rate, that is a significant move in support of equities as an asset class because what investors tend to do is to look for yield.
“So as the Nigerian economy has shifted to a negative real interest rate environment with those types of cuts you must look for investments that will give you higher yields and higher returns.
“Given the record dividend yields that are available in the Nigerian market and given the strong fundamentals in the number of the companies that are listed on the exchange, it makes sense that as investors try to rebalance their portfolios, that they will look at equity.
“There are also a number of fiscal issues that have happened which have been very supportive of the bourse.”