By Chukwuma Umeorah
To achieve the Federal Government’s ambitious $1 trillion economy over the next six years, the Presidet Bola Tinubu administration would need to harness the full potential of the capital market for national development.
According to experts who gave key recommendations on how to fund the National Development Plan (NDP), government would need to prioritise capital market-based infrastructure funds and facilitate increased participation of pension funds and insurance companies in the capital market.
Delivering a keynote address at the 2023 Annual Conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos at the weekend, the Director of the Institute of Capital Market Studies, Nasarawa State University, Keffi and Special Adviser to the Chairman of the Senate Committee on Capital Market and Institutions, Professor Uche Uwaleke, noted that among the recommendations to bolster the capital market’s role in financing the NDP and propelling Nigeria toward a $1 trillion economy, there is a need for government to privatise government enterprises by listing on the NGX to ensure macroeconomic stability, access to FX.
“The ambitious goal of a $1 trillion economy within the decade is possible with the capital market as it provides medium-to-long term funds for governments and companies and facilitates the mobilisation of private capital into key sectors such as infrastructure.
“Financing of the National Development Plan (NDP) through the capital market will depend to a large extent on breaking the barriers to its development. Efforts to meet the current challenges of the Nigerian capital market will inevitably set the stage for it to play a prominent role in not only achieving the growth targets set in the country’s NDP but also the dream of a $1 trillion economy within the next 6 years,” he explained.
The National Development Plan envisions a 5 per cent average GDP growth rate, the generation of 21 million full-time jobs, and lifting 35 million people out of poverty by 2025. To achieve these goals, a total investment commitment of N348.1 trillion is required, with the private sector expected to fund a substantial 85.7 per cent of this amount.
Highlighting the critical role and contributions of the market thus far, Uwaleke however, acknowledged that these contributions have not reached the required scale, especially considering the massive infrastructure gap the country faces.
Uwaleke cited the Malaysian economy and how the country provided opportunity through specific segments of the debt capital market that created a huge impact in infrastructure and Non Interest financing.
“Relative to GDP, the value of the Malaysian project-finance bond market stands among the world’s biggest. It is ranked 21st globally for the quality of its infrastructure, aided by the mobilisation of long-term local currency financing from the bond market to support private sector participation.”
He added that a recent World Bank report revealed that infrastructure bonds accounted for 26 per cent of overall bond issuance between the years 1993-2019, and in the last decade, the bond market in Malaysia has financed up to an average of $3.4 billion per year in the electricity, gas, and water sectors.
Uwaleke proposed the privatisation of government enterprises by listing on the NGX (Nigerian Exchange Group).
Amendments to existing laws, such as the Land Use Act of 1978 and provisions in the Investment and Securities Act (ISA) 2007, were also recommended to facilitate the processing of Mortgage Backed Securities (MBS) and encourage securitisation.
The Director General of the Securities and Exchange Commission (SEC), Lamido Yuguda, while commending CAMCAN’s effort at fostering better understanding of the market, said that to achieve even more, it required collaborative effort between the government and market participants.
Yuguda who was represented by SEC’s Executive Commissioner, Operations, Dayo Obisan, said, enhancing the capital market for national development entails a multi-faceted approach.
He said, “This includes deploying more infrastructure bonds, fostering public-private partnerships, establishing specialized entities like special-purpose vehicles, and listing state-owned enterprises.”
Other measures he highlighted were; issuing green and sustainability bonds to support sustainable projects, boosting small and medium enterprises, championing financial inclusion initiatives, refining the regulatory framework, conducting comprehensive investment education and awareness campaigns.
This is even as he reaffirmed the Commission’s commitment as the apex regulator to supporting the market and investors through creating and enabling and facilitating oversight and regulatory framework.
Also speaking, the Executive Director, Capital Markets, Nigerian Exchange Group (NGX), Jude Chiemeka, urged the government to address challenges hindering new investors from entering the market and create incentives for listed companies so as to encourage new investors, particularly foreign investors.
“Capital is competitive and will only go to where it would get a return. Addressing key issues like FX challenges, macroeconomic stability would attract more companies including internationals to list, thereby deepening the competitive nature of the market and increase the inflow of capital for long term infrastructural development of the country. The government should also deliberately work with the private sector because it holds the key to unlock the desired opportunities.”
CAMCAN’s Chairman, Chinyere Joel-Nwokeoma, earlier in her address stressed the relevance of the conference as it formed a platform to bringing together regulators, operators and partners not only to discuss about the progress of the capital market but to also deliberate on approaches to achieving economic growth and development of the nation.
“The theme of this year’s conference was predicated on the compelling need to properly execute the National Development Plan with the capital market at the core of medium and long term sources of finance. This can be achieved by creating new asset classes and portfolio diversification,” She said.