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Nigeria’s stock market plays a pivotal role in running its economy. Their stock market is a hub from which many investors and willing shareholders trade securities. The country also receives much foreign investment through other government and private financial instruments. 

Nigeria has a rapidly growing stock market, and CBN released a new policy when the economy is at a pace. This new policy relates to tightening the monetary situation. Overall, the central can’t of Nigeria has decided to tighten the monetary policy and raise interest rates. 

Loans and credit directly connect with the level of business in a country. Usually, what such a policy does is that it encourages banks to give out more loans. However, since the interest rates are high, few people take loans. 

Fast-paced business activity and thriving demand are good signs for the overall economy. However, although it depends on the other economic factors, monetary tightening results in a dropping business activity level. Nigeria does have a stable demand these days. 

However, inflation is still rising if one looks at the fuel prices and other products. All this does have to do with the Nigerian stock market. The Nigerian Stock Exchange (NSE), which is now known as the Nigerian Exchange group, surely has been earning a lot for many urban states. 

With a rising interest rate, more individuals and businessmen will be willing to save and keep their money invested. This can earn them a good rate of return. 

Falling Market Cap And The NSE Indexes

Market capitalization is the total value of a company’s shares. This measure gives out one value for the whole of a business’s shares that it sells on the market. 

In the NSE, the company’s market capital total fell dramatically following the monetary policy change. The capitalization was N28.2 trillion when the market closed on July 19th. 

Last Friday, this figure dropped by N1.046 trillion, a huge dip, as experts have commented. The final amount at which the market closed was N27.16 trillion. Moreover, several indexes for the stock market have also been dropping. 

There are three most common indexes in the NSE. These include the NSE 30, NSE All-share, and the All-Share Index (ASI). The NSE 30 changed -15.9 points last it closed, while the NSE all-share changed by approximately – 420 to close at 49.950. 

These changes are a little more dramatic than usual. And the biggest change that came right after the monetary tightening was in the ASI, which dropped by 3.8%. 

A Better Future:

The policy will certainly show its effects shortly. But the NSE might have to adjust a little bit. In the meantime, some ratings are about to drop! This change is sudden for the economy, but since the CBN has a perspective, we might have to bow down.

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