CBN Interest Rate Cut Triggers Massive Sell-Off: NGX Loses N1.141 Trillion in a Single Day

 

The Nigerian financial landscape witnessed a seismic shift on February 25, 2026, as the Central Bank of Nigeria (CBN) announced a surprise cut in the Monetary Policy Rate (MPR). While interest rate cuts are often intended to stimulate borrowing and economic growth, the immediate reaction at the Nigerian Exchange Group (NGX) was nothing short of catastrophic for equity investors. In a single trading session, the total market capitalization of the NGX plummeted by a staggering N1.141 trillion, marking one of the most significant single-day losses in recent history. This sudden downturn has left investors grappling with the complexities of monetary policy and its volatile relationship with the equities market.

​The Catalyst: CBN’s Surprise Monetary Shift

​The primary driver of this market bloodbath was the decision by the CBN’s Monetary Policy Committee (MPC) to slash interest rates. Historically, the CBN had maintained a hawkish stance to combat inflation, making fixed-income securities like Treasury Bills and Bonds highly attractive to institutional investors. The shift to a more "dovish" or expansionary policy—cutting the benchmark rate—was designed to lower the cost of capital for businesses.

​However, the stock market reacted with intense skepticism. Large-scale institutional investors, fearing that the rate cut signaled underlying concerns about the health of the Nigerian economy or anticipating a surge in inflation, began offloading their high-value bank and industrial stocks. This triggered a "panic sell-off" that wiped out over a trillion naira in valuation within hours.

​Market Data: A Sea of Red at the NGX

​The numbers behind the crash tell a story of total market dominance by the "bears." The NGX All-Share Index (ASI), which tracks the overall performance of all listed companies, saw a massive percentage drop, reflecting the broad-based nature of the decline.

• ​Market Capitalization: Fell from its previous high to a new low, losing N1.141 trillion in value.
• ​Top Losers: Heavyweight stocks in the banking sector—such as Zenith Bank, GTCO, and Access Holdings—led the decline, as investors feared that lower interest rates would shrink the net interest margins (profitability) of commercial banks.
• ​Industrial Giants: Companies like Dangote Cement and BUA Foods also saw significant price depreciation, as the broader market sentiment turned sour despite the potential for lower borrowing costs for these manufacturers.

​The Investor Paradox: Why Sell When Rates Are Low?

​On paper, a rate cut should be "bullish" (positive) for stocks. When interest rates fall, the returns on "safe" investments like savings accounts and bonds drop, theoretically forcing money into the stock market in search of higher returns. So, why did the NGX crash?

​Experts suggest several factors contributed to the N1.141 trillion loss:

1. ​Profit Taking: Many institutional investors were sitting on gains from the previous month and used the CBN news as an excuse to exit their positions and "lock in" their cash.
2. ​Inflationary Fears: There is a strong concern that cutting rates while inflation is still high will devalue the Naira further, making Nigerian stocks less attractive to foreign portfolio investors (FPIs).
3. ​Liquidity Squeeze: The sudden shift in policy caused a temporary liquidity crunch as funds moved out of equities toward more stable, non-market-dependent assets.

​Impact on the Banking Sector

​The Nigerian banking sector bore the brunt of the CBN’s policy shift. Since banks earn a significant portion of their revenue from high-interest loans and government securities, a lower MPR directly threatens their bottom line. Investors reacted swiftly, pricing in lower future earnings for the "Big Five" banks. This sector-led decline was the primary engine behind the trillion-naira wipeout, as the banking index remains a heavyweight component of the total NGX valuation.

​Looking Ahead: Will the Market Recover?

​Despite the grim headlines, some analysts believe the sell-off is an overreaction. They argue that once the "initial shock" of the rate cut wears off, the lower cost of borrowing will eventually benefit the real sector—manufacturing, agriculture, and construction—leading to better earnings reports in the second half of 2026. If these sectors begin to show growth, the money currently sitting on the sidelines may find its way back into the NGX, potentially sparking a recovery.

​However, for now, the message from the trading floor is one of extreme caution. The N1.141 trillion loss serves as a stark reminder of how sensitive the Nigerian capital market is to the whims of the Central Bank.

​Conclusion: A New Economic Reality

​The February 25 market crash is a defining moment for Nigeria’s economy in 2026. It highlights the delicate balancing act the CBN must perform between controlling inflation and encouraging investment. For the average Nigerian investor, the lesson is clear: in an era of rapid monetary policy shifts, diversification is key. As the dust settles on the NGX, all eyes remain on the Central Bank to see if further cuts—or a sudden reversal—are on the horizon.