The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, has identified the Central Bank of Nigeria’s (CBN) restriction of domestic investors from participating in its open market operations (OMO) as well as the interest rate cut as policies that have continued to buoy the stock market performance.
Onyema, who said this in a forum in Lagos at the weekend, pointed out that investors are always in search of higher returns on investments, saying the central bank’s policies have made the stock market attractive to investors.
The NSE All-Share Index and market capitalisation both appreciated by 5.30 per cent to close the week at 28,415.31 and N14.852 trillion respectively.
Onyema explained that the Nigerian economy as well as its financial market, like every other economy in the world, had been greatly impacted by COVID -19 and the associated economic challenges.
Owing to this, the market has recorded a lot of volatility, similar to other markets, since March when COVID-19 actually hit Nigeria.
“Since then, a number of policy changes have occurred. And as the world is now in a recovery mood and economies are opening up, we are seeing investors react to these policy changes. As you know, the markets are indicators of what would happen in the economy.
“So, the equities market is just reflecting that. I must say that some of the policy changes I made reference to include the CBN policy that domestic institutional investors should stop participating in the OMO market.
“That has driven significant funds into the Nigerian Treasury Bills (NTB) market and some of those funds have found their way into the equities market. We have also seen a cut in interest rate.
“That was a significant move in support of equities as an asset class. What investors tend to do is to look for yield.”
According to the NSE boss, since the Nigerian economy has shifted into a negative real interest rate environment, investors are now in search of investments that would give them higher yields and returns.
“Given the record dividend yield available in the Nigerian market and given the strong fundamentals of a number of companies that are listed on the Exchange, it makes sense that as investors try to rebalance their portfolio, they would look at equities.
“There have also been a number of fiscal policies that have been very supportive of the market. So, I commend the CBN and the CBN Governor for their thought leadership and generally their leadership in attacking the Covid-19 and in taking measures like cutting interest.”
Meanwhile, the CBN has directed all banks operating in Nigeria to ensure full compliance with its SWIFT Universal Confirmations requirements.
The banking sector regulator stated this in a circular posted on its website at the weekend.
“All SWIFT customers are required to provide confirmation on the outcome of all their incoming single customer payment (MT103) messages to SWIFT via Tracker, also known as Universal Confirmations.
“The confirmation should get to SWIFT within two business days on whether the beneficiary’s account has been credited, payment is rejected or pending. Please note that all financial institutions within the ecosystem will be measured on whether they confirm 80 per cent of their weekly payments,” the document signed by its Director, Banking Services Department, Sam Okejere stated.