Osinbajo challenges capital market on funding growth and development

VICE President Prof. Yemi Osinbajo has challenged capital market operators to brace up to the challenges of providing the long-term capital needed to fund needed growth and development in the country.

This is as Acting Director General, Security and Exchange Commission (SEC) disclosed that an estimated $350 billion is needed to fix the large infrastructure gap across the states and FCT.

At the Second Capital Market Stakeholders’ Forum organised by joint Senate and House of Representatives committees on Capital Market and Institutions in Abuja on Monday,

Osinbajo said, “Given that capital is extremely important for business, implies that the Nigerian capital market would be very important in enabling businesses to take advantage of the various opportunities that have been created by the government to access capital, both long and short.”

According to Vice President Osinbajo, Nigeria needs a capital market that would attract investors into various sectors of the economy with the aim of growing and diversifying the economy, creating jobs, improving the quality of life and improving revenue and export sources.

In this regard, the Nigerian capital market has a significant role to play in the attainment of these objectives.

He stated that financial markets are known to be engines of growth because of the strategic role they play in the flow of funding and drew a correlation between the level of development of the financial system and economic development for the simple reason that financial markets act as the intermediary between lenders and borrowers.

Vice President Osinbajo however, stated that although such correlation was the case for the advanced market economies, the same cannot be said for Nigeria as our financial system is still evolving.

He nonetheless noted “the many significant achievements of the Nigerian capital market in the areas of legislation, regulations, technology, processes as well as new products all of which have attracted local and foreign operators to the market.”

Osinbajo also urged the market to take advantage of the business opportunities that have been created by the government, through various tax incentives, investment in capital and also given the diverse resource base of Nigeria none of which we must not forget to mention is the entrepreneurial capacity of the Nigerian, the demand for capital would certainly increase well beyond the current levels and that implies that the capital market indeed must step up its activities and grow to meet the expectations of the large and sophisticated players who would be requiring the services .

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“The necessity for stable long term funds for the actualisation of the vision of economic growth and development, therefore, places Nigeria’s capital market in a unique and strategic position for which it must be prepared”, he declared.

In a keynote address, Acting Director General, Security and Exchange Commission (SEC), Ms. Mary Uduk observed that while economic growth is the increase in the production of goods and services usually measured in GDP, economic development is larger as it includes improvement in the quality of life and living standards of citizens.

These includes improvement in literacy, health and life expectancy, better savings- investments culture as well as improves wealth distribution, housing and the environment.

She disclosed that there are many capital market instruments that can be used to stimulate economic development in Nigeria- bonds, equities and commodities.

“Recently, Nigeria issued the N100 billion sukkuk to finance 25 road projects and also Green bonds to finance afforestation, renewable energy and provision of clean energy.

“Opportunities also exist to issue revenue bonds to finance revenue generating projects which will exert less pressure on government budget and allocation.

“The Nigerian bond market therefore, has the potential to close the country’s huge infrastructure deficit, estimated at $350 billion in 2013.

“Equities also have been issued by many public companies to raise funds and expand their operations.

This has engendered improved productivity, employment and governance.

“Government has also utilised the platform of the capital market to privatise some of its enterprises in order to make them profitable, less bureaucratic and less dependent on lean government resources.”

Uduak said so far, Federal Government has issued N8.5 billion savings bonds adding that other investible opportunity in the capital market is Collective Investment Schemes currently totaling N610 billion.

She also explained that portfolio investment in the first quarter of 2018 amounted to 16.5 per cent of total $6.3 billion capital importation.

However, there is still a need to encourage more retail investor participation so that market can be less vulnerable to the behaviour of foreign investors.

Financial literacy, ex-dividend, direct cash settlement and investors protection funds are to raise the retail investors’ confidence and participation levels.

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Earlier, Acting Senate Chair on Capital Market and Institutions, Foster Ogala said in a welcome address that although some achievements have been made since the first forum in 2016, additional legislation was needed to amend extant archaic laws.

Some of the achievements include passage of Bill on Demutualisation and amendment of Companies And Allied Matters Act, which were waiting for presidential assent.

Contributing during the roundtable discussion, former Minister of Finance, Dr Shamsuddeen Usman advised that there must be a well-designed framework for its implementation as well as monitoring for the problem of constituency projects to be solved.

He also advocated for “a long-term national legislation on infrastructure should be an integrated effort to curb discontinuity of infrastructure development in Nigeria”.