Stock Market Will Benefit From Inflation Decline- Uwaleke

Nigeria’s inflation rate declined to 23.18 per cent in February 2025, down from 24.48 per cent in January, a development that is expected to positively impact the stock market, according to Professor Uche Uwaleke, Nigeria’s first Professor of Capital Market.

The National Bureau of Statistics (NBS) announced the decline in its February 2025 Consumer Price Index (CPI) report, stating that the inflation rate eased by 1.30 percentage points compared to the previous month.

The report also highlighted a significant year-on-year drop, as February 2025 inflation was 8.52 percentage points lower than the 31.70 per cent recorded in February 2024.

Commenting on the development in an exclusive interview with THE WHISTLER, Uwaleke explained that lower inflation typically benefits the equities market due to the inverse relationship between inflation and stock prices.

He noted that as inflation slows, real returns in the stock market increase, making it a more attractive option for investors.

“In the months ahead, I expect the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to respond to this trend, particularly if it is sustained, by cutting the benchmark policy rate.

This move would ultimately reduce yields in the fixed income market, encouraging investors to diversify their portfolios in favor of equities,” he stated.

The NBS further clarified in its report that, on a month-on-month basis, inflation in February 2025 stood at 2.04 per cent, indicating a continued deceleration. The agency attributed this moderation to easing cost pressures in key sectors of the economy.

Analysts believe that a sustained decline in inflation could bolster investor confidence in the stock market by improving real returns and prompting a shift from fixed-income securities to equities. This shift could enhance market liquidity and contribute to a more stable investment climate.

As Nigeria navigates its economic landscape, stakeholders will closely monitor inflation trends and the policy responses of the CBN, which could shape the trajectory of financial markets in the coming months.

Stock Market Will Benefit From Inflation Decline- Uwaleke is first published on The Whistler Newspaper