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Develop infrastructure with capital market funds — Experts

By on January 31, 2015

Regulators, operators and other stakeholders in the Nigerian capital market have emphasised the need for governments at all levels to source funds for capital projects from the market.

The stakeholders, who said the capital market was best suited for infrastructure financing, stressed that given the current economic challenges facing the country, it was important for the government to avoid sourcing funds for capital projects externally.

They said these in Lagos on Thursday at a one-day dialogue on ‘The capital market and 2015 federal budget’, which was organised by the Chartered Institute of Stockbrokers, Association of Stockbroking Houses of Nigeria and the Association of Issuing Houses of Nigeria.

To ensure that the capital market effectively played its expected role in driving the economy of the nation, they also noted that there was an urgent need to increase local institutional and retail investment in the market.

In his remarks at the event, the Acting Director-General Securities and Exchange Commission, Mr. Mounir Gwarzo, said, “I think beyond this year’s budget, the capital market must begin to assert itself as the most reliable medium for government to source for funds to finance critical infrastructure. Our infrastructure needs are too massive to be dependent on the meager yearly budgetary allocation.”

Gwarzo, who was represented by Mr. Edward Okolo, called on the stakeholders to come up with viable products through which such funds could be raised.

“My challenge to this distinguished gathering is to conduct the deliberations with the goal of coming up with clear, actionable ways in which the capital market could be better leveraged by our governments (at both Federal and State levels) to finance infrastructure,” he said.

The Chairman, NASD OTC Plc, Mr. Olutola Mobolurin, in a keynote presentation, stressed that the 2015 budget proposal did not address key issues, stressing that the baseline assumptions of the budget were faulty especially with regards to the oil price benchmark. He also raised concerns about the presence of an allocation for subsidy and SURE P.

Mobolurin also lamented the continued dominance of the stock market by foreign portfolio investors, who flee from the market at the slightest rumour or uncertainty.

The NASD chairman, who noted that foreign portfolio participation in the market had increased from 14.8 per cent in 2007 to 59 per cent as of November 2014, said, “We must generate savings within the country to supplement the foreign investment. We cannot depend on foreign investment if we want to salvage this country. We need to expand local institutional investment capacity and to achieve this; pension fund administrators must play a larger role to do this.

“They must participate actively in the formation of the capital market. They should buy mature bonds and tested companies.   20 per cent of all pension funds must be invested in equities.”

He also said there was the need for local private equities and venture capital to be promoted through tax incentives, adding that there was an urged need for the country to develop globally competitive tax code.

“We must remove discriminatory tax against insurance industries. We must end some discriminatory tax practices. We should have a tax code that is neutral and encourages everybody in the same way,” he said.

The President, CIS, Mr. Albert Okumagba, called on the Federal Government to promote the culture of savings in the country through appropriate incentives.

He added, “Another approach to national savings is the review of the privatisation programme of the Federal Government and the divestment of its holdings in the privatised companies in order to mobilise funds and encourage the private sector operators to develop the economy while the government provides an enabling environment.

He advised the Federal Government to consider the divestment of at least 20 per cent of its holdings in the power companies to the Nigerian investing public as preparatory for listing the shares on a stock exchange.

“In addition, in order to solve the perennial housing problem, more Real Estate Investment Trusts (REITs) should be created as a matter of urgency to boost investment in the real estate sector.”

The President, AIHN, Mr. Victor Ogiemwonyi, on his part, explained that while the devaluation of the naira had the potential to prevent round-tripping and protect local industries, it appeared that the CBN was currently over-protecting the naira value and thus making it artificial while also depleting the nation’s foreign reserve in defending the naira exchange rate.

He said, “Since the value of the foreign reserve essentially determines the country’s capacity to borrow internationally and to support our international trade, the continuous hemorrhaging of the reserves is not in the best interest of the country.

“While keeping the managed float, we believe that the currency should be allowed a wider band, say up to N200/$. The CBN may need to intervene if the new band is breached. We believe that at N200, it would become unattractive for speculators to engage in any profitable business that requires hard currency.”

 

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