Capital market operators apprehensive over high yields on FGN bonds

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By Babajide Komolafe & Nkiruka Nnorom

STAKEHOLDERS in the Nigerian capital market have criticised the high interest rate on FGN bonds saying it discourages investment in productive activities. They spoke at a one day seminar organised by the Securities and Exchange Commission, SEC, to deliberate on the implications of the 2017 budget to the capital market.

They also called on the federal government to make concerted effort to address inconsistencies in the foreign exchange regime as it adversely affects private sector operations.

The seminar featured a presentation on “2017 Budget of Growth and Recovery: Relevance, Implications and Perspectives of the Nigerian Capital Market” by Mr. Afolabi Olowookere, Head, Economic Research & Policy Management and a panel discussion with Johnson Chukwu, Managing Director/CEO, Cowry Assets Limited, Mrs Ore Sofekun, Managing Director/CEO, Investment One Vencap Limited, Mr. Bodun Adebipe, Chief Consultant, B. Adebipe Associates Limited and Bayo Rotimi, CEO, Quest Advisory Services Limited as panelists

LISTING OF SHARES : From left, Alhaji Musbahu Basir, Director, Jaiz Bank Plc; Oscar N. Onyema, OON, Chief Executive Officer, Nigerian Stock Exchange, NSE; Alhaji Umaru Abdul Mutallab, CON, Chairman, Jaiz Bank Plc and Alhaji Umaru Kwairanga, Director Jaiz Bank Plc at the Facts Behind the Listing at the NSE.

According to Johnson Chukwu and Biodun Adedipe, with interest rate of over 15 per cent on FGN bonds and treasury bills, which are risk free instrument, nobody will want to invest in productive activities with all the attendant risks. They argued that the use of high interest rate regime to grow the economy was not practicable as it stifles the growth of Small and Medium Enterprises, SMEs.

In a communique issued at the end of the seminar, the operators emphasized the need for greater synergy between the monetary and fiscal policies and elimination of silos in policy formulations.

They said that public private partnership should be exploited in infrastructure development, arguing that unless our infrastructure is first developed by local funds, no foreign investors would be willing to bring in their funds to develop the infrastructures.

On how to stimulate growth in the capital market, they said that privatization of government owned firms is key to stimulating economic activities, while calling on the government to specify specific timelines to identify assets that would be sold and the process through which they would be sold. “The same should be done through the capital market. This would encourage efficiency and scarce resources used to manage these assets can be freed up and channeled to critical sectors of the economy,” they said.

Exploiting private partnership

“Government should exploit private partnership in developing infrastructure. There should be proper and lingering framework to ensure that every party to this partnership are held accountable to their part in this agreement. “Foreign exchange regime inconsistencies need to be sorted out as this impacts private sector adversely.

The conflict between monetary and fiscal policies needs to be resolved; there is need for greater degree of synergy and elimination of silos in policy formulation.

“The Boards of SEC and other critical agencies in the financial sector should be reconstituted. The delay in their reconstitution is sending wrong signals to prospective investors” they noted.

There is need for better coordination between the regulatory agencies in the financial sector – the Central Bank of Nigeria, the Pension Commission, PenCom, NAICOm and others,” they added.

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