Money market is now investors’ haven – expert
Mr Wale Abe, the Executive Secretary, Financial Markets Dealers Association (FMDA), says the local money market has become investors’ haven due to the downward trend in the capital market.
Abe told the News Agency of Nigeria (NAN) in Lagos that the development in the nation’s capital market, particularly the fall in the price of shares, had made investors seek opportunities in the money market.
NAN reports that the All Share Index (ASI), a monitor of stock price movement on the Nigeria Stock Exchange (NSE), has been on the decline in the recent time.
Abe said that there was always a relationship between risk and investment, adding that this reality had motivated investors to take advantage in the short-term money market instruments.
Abe said that the new interest in the money market instruments by investors was because of the guarantee and the safety of government-backed treasury bills and bonds with fixed returns.
He said that the volatility in the capital market had led to lower yields by listed equities, stressing that this had made many portfolio investors to now seek other investment outlets.
Abe also said that the lower yields had made the stock market to become unattractive to both domestic and foreign investors.
He said that the money and capital markets were often not complementary, explaining that when one offered a high rate of returns, the other could be low.
The net yield of treasury bills is higher than that of the stock market.
The two markets differ, especially because of the tax deduction in the stock market, therefore making the short-term investors attracted to the money market.
The higher the interest rates in the money market, the lower the interest rate in the stock market,” Abe said.
On the gap between the banks’ lending and saving rates, the executive secretary said that the rates were based on the proportion between the average lending and deposit rates.
Abe also said that difference would give the cost of the direct mobilisation of deposits, the cost of doing businesses as well as the markup otherwise known as profit.
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