The chief executive of Nigerian Exchange Group has urged the Central Bank of Nigeria’s Monetary Policy Committee to treat the development of deep, liquid capital markets as a macroeconomic necessity rather than a separate financial sector ambition, arguing that weak market architecture undermines the effectiveness of interest rate decisions regardless of their direction.
Presenting his group’s position at a CBN MPC workshop, the NGX Group leader argued that monetary policy signals travel through financial market structures before reaching households and businesses, and that fragmented, shallow markets dilute those signals in ways that policy rate adjustments alone cannot overcome. He said the real question for policymakers was not simply the level of the benchmark rate but whether the financial architecture transmitting it was sufficiently deep and liquid.
He pointed to the divergence between the current monetary policy rate of 26.50 percent and the 10-year sovereign bond yield of 14.95 percent as evidence that markets were pricing long-term reform credibility rather than mechanically tracking short-term interest rate movements. The NGX All-Share Index recorded a 60.13 percent year-to-date return in 2026 and a 51.19 percent return in 2025 despite elevated interest rates, reinforcing the view that equity markets were responding to the broader reform environment, including foreign exchange liberalization and improving investor confidence, rather than the policy rate in isolation.
The presentation identified the coexistence of Treasury Bills, Open Market Operations instruments, and standing facilities as a structural problem that created competing short-term signals, weakening benchmark clarity and preventing clean transmission of policy through a single instrument. Market activity also remained concentrated in a small number of dominant sectors, while retail investor participation was limited, constraining the wealth-effect channel through which rate changes were supposed to reach ordinary Nigerians.
The NGX Group proposed cleaner benchmark yield curves, stronger forward guidance from the CBN, deeper secondary market liquidity, broader retail participation, and a Transmission Conditions Index that would use real-time market data to help policymakers assess how effectively their decisions were reaching the economy. Equity market capitalization stood at 159.73 trillion naira in 2026, with fixed-income markets at 55.82 trillion naira.
