Capital market is the barometer of every economy. It mobilises private and public savings from surplus spending units and channels them to the deficit units for the production of goods and services; as well as financing infrastructure. Suffix to say the importance of capital market in Nigeria’s economic growth and development cannot be over emphasised.
Not yet living the name with its capital market
Nigeria has till date not risen to the challenge of living up to its name –the giant of Africa. The nation has failed to have a robust capital market that correlates strongly with enhanced and economic stability and a broader market that presents varied options to project and programme funding for both the private and public sectors in an economy while presenting a liquid platform for assets preservation.
At 60, Nigeria should have a broader capital market that offers large and liquid equities and debt instruments that will increase the competitiveness of the nation’s capital market as a global investment destination.
The hard truth
Most decisions of Nigerian government, the capital market regulators, operators and even investors have in one way or the other not helped the growth of the capital market of Africa’s largest economy.
In many aspects, the Nigerian capital market is behind global as well as some regional peers, thereby signposting the need to broaden and deepen the market. There is still low level of diversity and sophistication of the products in the Nigerian capital market.
Asset classes that are available for trade are predominantly limited to equities and very recently to bond and ETFs. Much has been said about trading Futures, Derivatives, and other variant asset classes but that hasn’t kicked off thereby limiting investors to diversify investments and also impede desired economic functions such as risk management, price discovery and transactional efficiency.
For equities, issues such as rising unclaimed dividend, market infraction, capital loss due to impact of negative economic growth on companies’ earnings, etc have made investors’ appetite for stocks to remain low. For debt instruments, the main macro theme affecting it has of course, been rising interest rates. This is forcing spreads wider as portfolios are reconfigured on the investor side.
Though, Nigeria’s debt capital markets have proven resilient in a challenging environment. Confidence building over the last few years and strong market liquidity have resulted in noteworthy transactions from previously unrepresented sectors. However, there is still a lot of room for growth.
Our best is not good enough
On its part, government is expected to adopt fiscal and monetary policies that would stimulate private sector investment and increase patronage for issuance and fundraising in the nation’s capital market.
Also, government has not done enough to attract more multinational companies in key sectors of the economy to float offerings and ultimately, revive the primary market segment of the capital market thereby improving on the current illiquid position.
For the apex capital market regulator and the self-regulatory organisations (SROs) there is need for continuous interface with the government to explore various options that would facilitate the listing of all major enterprises like the Telcos and Oil & Gas that occupied the commanding heights of the Nigerian economy.
There is no doubt that increased representation of the Nigerian economic structure would imply stronger capacity to drive growth through the creation of established templates for companies to access long term capital that is suitable for their specific needs. The importance of attracting more listings cannot be overemphasized.
The capital market Nigeria should have
The full implementation of Nigeria’s capital market master plan remains a priority. The master plan has been designed for 10 years. The year 2020-2025 is the second part of the master plan.
At 60 years, Nigeria should have a capital market that is internationally competitive, bearing the hallmark of high level of relevance, productivity and innovation. The nation’s capital market should not box investors into few asset classes but must be flexible and easily adaptive to an ever changing environment while providing market participants with a wide range of products and services comparable with the leading financial centers in the world.
The Nigerian capital market should be seen to be much relevant in all core areas necessary to develop the economy. The nation’s capital market must actively pursue deliberate growth, scale, robustness, flexibility and improved practices. Regulators must also have the right competences and skills to move the capital market forward and leverage technology in doing so. Robust systems are expected to be established in risk management, surveillance as well as transactions. Nigeria capital market operators are expected to conduct their activities fairly and ethically, and ensure also be supported in their activities to develop the market.
In this new age of Nigeria, her capital market regulators must pursue great ideals, not just for its own benefits but within and in tandem with the need and aspirations of the larger economy. Local and foreign investors must be attracted and educated, assured of their rights and protection. Nigeria must pursue capital market growth that translates into and even drive development in the real sector across its entire economy.
