Renowned Professor of Finance and Capital Market at the Nasarawa State University, Uche Uwaleke has affirmed that the reduction in the inflation rate reported for February 2025 would have positive impact on the stock market.
Prof. Uwaleke in a chat with TheFact Daily on Monday explained that disinflation is normally a positive development for the equities market in view of the inverse relationship between inflation and stock prices.
He said the increase in real rate of returns in the equities market following decelerating inflation rate is an incentive to investors in the stock market.
This paper had earlier reported that the National Bureau of Statistics (NBS) in its Consumer Price Index (CPI) report released today revealed that the headline inflation rate eased to 23.18% in February 2025, relative to the 24.48% recorded in January 2025.
This shows a decline of 1.30% compared to the January 2025 headline inflation rate.
The Bureau said, on a year-on-year basis, the Headline inflation rate was 8.52% lower than the rate recorded in February 2024 (31.70%).
This shows that the Headline inflation rate (year-on-year basis) decreased in February 2025 compared to the same month in the preceding year (i.e., February 2024), though with a different base year, November 2009 = 100.
On a month-on-month basis, the Headline inflation rate in February 2025 stood at 2.04%.
NBS attributed the decrease in the headline index for February 2025 to the decline in the average price of some items in the basket of goods and services at the divisional level.
Reacting to the development, Prof. Uwaleke said, “the reduction in the inflation rate reported for February 2025 to 23.18% will have positive impact on the stock market.
“Disinflation is normally a positive development for the equities market in view of the inverse relationship between inflation and stock prices.
“The increase in real rate of returns in the equities market following decelerating inflation rate is an incentive to investors in the stock market.
“In the months ahead, I expect the MPC of the CBN to respond to this development, especially if sustained, with a cut in the benchmark policy rate which will ultimately lower yields in the fixed income market and trigger investors portfolio diversification in favour of equities.”
