SEC says liquid government bond market good for economy

The Securities and Exchange Commission (SEC) has said from the perspective of capital market development, the development of a liquid government bonds market would have a positive effect on the economy.

Lamido Yuguda, Director General, SEC stated this during the Annual Conference of the Capital Market Correspondents Association of Nigeria with the theme: “Nigeria’s Public Debt and the Capital Market” held in Lagos last weekend.

This Yuguda said is because a liquid government bond markets implies that there is sufficient offering of government bonds across a range of maturities, which is in turn key to the construction of the benchmark yield curve (which is important for the establishment of the market-based risk-free interest rate used in equity pricing).

Represented by Dayo Obisan, Executive Commissioner Operations, SEC Yuguda said this synergistic relationship between the government bond and equity markets have been observed in several East Asian economies, which experienced a surge in private investment and equity market capitalization following the establishment of a liquid debt securities market.

“At the same time, an increase in government expenditure funded by debt crowds out private investment, which in turn adversely affects aggregate expenditure and, consequently, economic growth with implications for the capital market.

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“In addition, an underdeveloped capital market will affect institutional investors negatively, restraining the amount and maturity of funding available to the government locally.

Yuguda stated that as the apex regulator of the capital market, the SEC is committed to creating an enabling and facilitative oversight and regulatory framework supportive of the deepening and development of the Nigerian capital market.

He said, “As you are aware, the Honourable Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed, launched and unveiled the revised Nigerian Capital Market Master Plan 2021-2025; “The updated Master Plan underscores the Commission’s commitment to deepening and re-positioning the financial market as a key anchor of our economy.

“The Master Plan, which represents collective aspirations of the capital market community, is focused on driving initiatives geared towards growing and deepening the Market with the ultimate goal of accelerating the emergence of our Country into the top 20 global economies by the year 2025.

He disclosed that the capital market is more resilient and is on a steady growth trajectory adding that Capital market correspondents have contributed to the development of the market and expressed delight at their partnership with the Commission in this noble task of developing and deepening the capital market.

The SEC DG said Capital market correspondents have taken on an increasingly important role of communicating to the public some of the Commission’s initiatives aimed at developing the market.

He assured that the SEC is committed to supporting efforts aimed at addressing financial literacy and empowerment gaps within our society. This commitment is expressed in the various financial inclusion and literacy initiatives being undertaken by the Commission solely or in collaboration with other stakeholders. This workshop we are witnessing today being one of such.

“There is no doubt in my mind that, the capital market presents a good platform for addressing many of Nigeria’s economic challenges. On our part as regulators, we shall continue to introduce new ideas and policies towards developing and regulating a capital market that is dynamic, fair, transparent and efficient, to contribute to the nation’s economic development.

“We will also continue to fulfil its mandate of protecting investors and creating an enabling environment for market operators. Policymakers and practitioners alike are keen to understand the complex nexus between the public debt market and the Nigerian capital market,” he added.