The Impact of The Interest Rate Hike on Nigeria's Economy.

 The recent Central Bank Hike of interest rates from 18.5% to 18.75%  is not expected to impact Financial Markets. Financial Markets expert said in an interview with Nairametrics.

This also contradicts the expectation that the rally would reduce investor demand for the stock market and drive investors towards the bond market.

Financial experts exclusively interviewed by Nairametrics expect more liquidity in the system with the 25 basis point hike been more cautious than the previous hikes. He said he didn't think the market will be affected.

The Managing Director of Arthur Stephen Asset Management Limited, Olatunde Amorebbe reacted to the trend in an interview, noting that the interest rate hike is the highest that happened in few years back.

Current interest rates are determined by several factors.

The MPC is expected to raise interest rates to curb inflation while at the same time seeking to comply with President Bola Tinubu's interest rates obligations.

It turns out that there is a dilemma between the President's mandate and inflation having conflicting effects on interest rates.

Another factor is the increase in liwliquid of the financial system.

CBN usually increase interest rates and issue securities to reduce liquidity in the system.

My conclusion is that MPC has decided to split the difference between liquidity, Presidential mandate and rising inflation.

In this way, they are able to maintain moderate stand while working on the issue.

So the spike is the below MPC had raised in the last five sessions, he said.

Amorebbe stressed further that the impact on the financial markets shall be contained.

He added that the 25 basis point is enough to overly influence financial markets, but that would not stop normal profit taking markets across the world.

We would have said bond yields would have gone up if they had raised prices more.

And with inflation still rising significantly and market still liquid, we may not see any other movement in the market.


The Managing Director of Cowley Asset Management Limited, Johnson Chukwu said:

We expect more liquidity to flow into the equity market.

As for the income market, we do not expect the aftermath of this 25 point basis rate hike to impact equities.

Federal debts should include short term bills and bonds which will drive fixed income, but until interest rates in yhit secror rises, people will keep turning to equities.

The Managing Director of Crane Securities Limited, Mike Eze also told Nairametricsexppec that the hike is aimed at keeping inflation under control

He stated that the MPC is been cautious, given the current economic climate, any mistake can send the country into recession.

The current interest rate is alarming and they want to prevent stagnation.

Nigerians no longer have much purchasing power in their hands .

There is much money in circulation and this is one of the reason for the interest rate hike

And it encourages people to keep money in Banks, the inflation rate is high and it is an indirect way of absorbing liquidity.

We hope we can find who the Treasury Secretary will be and lead the economy before the 60-day deadline given to the President to appoint cabinet members expires.

The sooner the President appoints his ministers, and economic team, the better.

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