Nigeria’s equities market could see stronger investor demand following the Central Bank of Nigeria’s (CBN) decision to cut its benchmark interest rate by 350 basis points to 23%.
The rate cut, announced after the Monetary Policy Committee’s 307th meeting, represents the second MPR reduction in 2026 and a significant easing of monetary conditions.
Market analysts expect lower borrowing costs to encourage portfolio rotation from fixed-income securities into equities as yields on government securities adjust downward.
As at the close of transactions on Tuesday, September 22, the Nigerian equities market continued its positive run with the Nigerian Exchange (NGX) All-Share Index (ASI) gaining 0.18% to close at 250,614.66 points while the market capitalisation increased by N297.21 billion to N162.68 trillion, further lifting the year-to-date (YTD) return to +61.05%. Investor sentiment remained positive, with 36 gainers against 26 decliners.
Chief Blakey Ijezie of Okwudili Ijezie & Co said the rate cut would likely further increase equity transactions and push share prices higher as investors seek better returns. He also expects declining fixed-income yields to make equities more attractive.
Ijezie added that lower borrowing costs should support manufacturers and other businesses by reducing financing expenses, which could eventually translate into lower production costs and moderate prices.
Abiodun Ogunniyi of GTI Group similarly described the decision as positive for the real sector after several years of elevated borrowing costs. He said lower rates should improve access to credit and encourage businesses to borrow for production and expansion.
However, Ogunniyi noted that commercial banks have been charging as much as 30% to 35% MPR on some products. He expects banks to review their pricing, although the speed of adjustment will depend on competitive conditions.
The MPR cut comes after Treasury bill yields had already been trending lower. Nairametrics reported on September 21 that the 364-day Treasury bill rate had fallen from 17.59% in August to 16.62% by September 9, strengthening the case for investors to reassess allocations between government securities and equities.
For equities, the immediate implication is a potentially stronger incentive to move funds towards risk assets as fixed-income returns decline. The longer-term benefit will depend on how quickly lower policy rates translate into cheaper lending, stronger consumer demand and improved corporate earnings.
