Popoola Advocates Stronger Capital Market Integration into CBN’s  Monetary Policy Framework

Kayode Tokede

The Group Managing Director/Chief Executive Officer of Nigerian Exchange Group (NGX Group), Temi Popoola, has urged the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to treat capital market development as a macroeconomic necessity, arguing that the effectiveness of monetary policy increasingly depends on the depth, liquidity, and coherence of Nigeria’s financial markets.

Delivering the presentation on his behalf at the CBN MPC Workshop recently, Group Chief Strategy Officer, NGX Group, Jumoke Olaniyan outlined the Group’s position during a session themed ‘Structure and Behaviour of Nigeria’s Equity and Government Debt Markets: Implications for Monetary Policy Effectiveness’.

According to Popoola, monetary policy decisions travel through market architecture before reaching households and businesses, and weak market structures can dilute policy effectiveness regardless of the stance adopted by the MPC.

“The real question is not only the level of the policy rate, but whether the financial architecture through which it is transmitted is sufficiently deep and liquid,” he stated.

Popoola noted that Nigeria’s markets are increasingly pricing the broader reform environment, including FX reforms, fiscal adjustment, and improving investor confidence, rather than responding solely to changes in the interest rate.

Highlighting the growing scale of the Nigerian capital market, Popoola disclosed that equity market capitalisation had risen to N159.73 trillion in 2026, while fixed-income market capitalisation stood at N55.82 trillion. The NGX All-Share Index (ASI) recorded a 60.13 per cent year-to-date return, reflecting deepening investor confidence despite elevated interest rates.

However, the presentation observed that market activity remains concentrated in a few dominant sectors, while retail participation remains relatively low, limiting the broader wealth-effect channel through which monetary policy reaches ordinary Nigerians.

On the debt market, Popoola pointed to the divergence between the current MPR of 26.50 per cent and the 10-year sovereign yield of 14.95 per cent as evidence that markets are pricing long-term reform credibility rather than merely reacting to interest rates. The ASI’s 51.19 per cent return in 2025, achieved despite elevated rates, reinforced this position.

Popoola also cautioned that the coexistence of Treasury Bills, Open Market Operations (OMO) Bills, and standing facilities creates competing short-end signals that weaken benchmark clarity and dilute policy transmission. “MPR changes are absorbed across multiple instruments rather than transmitted cleanly through a single benchmark,” he noted.

To strengthen policy effectiveness, Popoola advocated cleaner benchmark yield curves, stronger forward guidance, deeper secondary market liquidity, broader retail participation, and greater integration of capital market indicators into MPC analysis.

He also proposed a Transmission Conditions Index (TCI), a market-based diagnostic framework designed to help policymakers assess how effectively policy signals are transmitted through financial markets. According to him, the framework, which leverages real-time market data from NGX and other Exchanges, underscores the growing role of market infrastructure in monetary policy analysis.

“Capital market development is not a separate financial-sector ambition,” Popoola concluded. “It is increasingly a macroeconomic necessity.”