Monetary Policy: Operators Foresee Lull in Banking Sector Stocks.


Capital market operators have said that the banking sector might witness a lull as investors shift investment to other sectors.

They told the News Agency of Nigeria (NAN) in Lagos that the shift was due to the Central Bank of Nigeria (CBN’s) tight monetary policy.

According to Mr David Adonri, the Chief Executive Officer, Lambeth Trust & Securities Ltd., Lagos, the lull will remain till the end of 2013. Adonri added that the lull in the sector might slip into 2014, should the banks payout low dividends at the end of this financial year.

“Investment emphasis has shifted away from banking stocks due to the Central Bank of Nigeria (CBN) monetary policy.

“This is because investors are afraid that banks’ earnings will decline following the tight monetary policy.

Adonri said that consumer goods and petroleum sectors would likely dominate the market, till the end of 2013 as emphasis shifts from the banking sector. He said that investors had developed a ‘wait-and-see’ attitude following fears that bank profits and dividends payout would decline in the 2013 financial year. Mr Wale Onigbode, the Managing Director, Calyx Securities Ltd., Lagos, said that the rush for bank stocks had slowed down in the last two months.

According to Onigbode, this is due to fears by investors that the apex bank may further tighten the monetary policy.

Onigbode said that investors had embarked on portfolio swap to minimise their exposure to banking equities due to the policy.

He added that the 2013 financial results of the sector, when released, would determine the direction of the capital market and banking equities.

NAN recalled that the CBN in July raised the Cash Reserve Requirement (CRR) on public sector deposits from 12 per cent to 50 per cent.

The deposits comprised deposits from all tiers of government.

CRR is bank’s deposit balances, which banks must have as reserve in cash with the apex bank.

The reserve ratio is one of the instruments used by the apex bank to mop or check moneysupply in circulation.




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