3 hours ago
1
By Rukayat Moisemhe
An investment expert, Mr Chukwudi Nga, has called for a deeper and broader development of Nigeria’s capital market to effectively finance the country’s ambition of achieving a one trillion dollar economy by 2030.
Nga, Managing Director of Morgan Capital Investment Ltd., said this in an interview with the News Agency of Nigeria (NAN) in Lagos on Thursday.
He noted that the call was particularly pertinent as Nigeria marks its 66th independence anniversary, with just four years left to achieve its one-trillion-dollar economic ambition.
He said that although Nigeria had established the basic institutions, regulatory framework, infrastructure and products needed for a modern capital market, the market was still not deep enough to meet the financing needs of the economy.
According to him, the next phase of development requires more quality listings, stronger liquidity, a wider domestic investor base and greater mobilisation of long-term savings into productive investments.
“We have built a capital market with the basic institutions, regulation, infrastructure and products required to play a major role in financing the next phase of our economic development.
“But the market is still not deep enough relative to the size and financing needs of the Nigerian economy,” he said.
Nga said the market had recorded significant developments, including the transition to a T+1 settlement cycle, which took effect on June 1.
The Securities and Exchange Commission (SEC) said the transition was aimed at improving market efficiency, reducing counterparty exposure, enhancing liquidity and aligning the Nigerian market with international standards.
He also cited Nigeria’s return to FTSE Russell Frontier Market status in September as another positive development.
“These improvements in foreign exchange liquidity, capital repatriation and market accessibility has strengthened the market’s attractiveness to investors,” he said.
Nga said the developments were important for investor confidence but noted that the country needed to translate the reforms into greater mobilisation of long-term capital for businesses and infrastructure.
He said more companies should be encouraged to access the market through equities, corporate bonds and commercial papers, while infrastructure projects could make greater use of infrastructure bonds, Sukuk, project bonds and asset-backed securities.
“The capital market should increasingly serve as a major source of long-term financing for production, infrastructure and other productive sectors of the economy, rather than being seen mainly as a secondary market for trading existing securities,” he said.
The expert also identified pension funds, insurance companies, mutual funds and other institutional investors as critical to providing long-term capital to productive sectors.
He said government could support the process through appropriate tax incentives, faster approval processes, lower transaction costs and policies that encouraged institutional investors to commit more funds to long-term investments.
Nga cited the ongoing Initial Public Offering (IPO) of Dangote Petroleum Refinery and Petrochemicals, which involves 4.1 billion shares at N525 per share, valued at about N2.15 trillion.
According to him, transactions of such scale, alongside potential listings of major public and private enterprises, can broaden the market and increase opportunities for Nigerians to participate in the ownership and growth of major businesses.
He, however, said market capitalisation alone should not be used to measure the depth of the market.
Nga said a truly deep market required more quality listings across sectors, stronger liquidity, a wider retail and institutional investor base, a deeper corporate debt market, and greater capacity to channel long-term capital into productive investments.
He identified energy, telecommunications, technology, manufacturing, agriculture and infrastructure as sectors requiring stronger representation on the capital market.
On the current economic environment, Nga said the recent reduction in the Monetary Policy Rate (MPR) to 23 per cent could gradually influence investors’ portfolio allocation between fixed-income securities and equities.
He said lower interest rates could, over time, support equities by reducing borrowing costs for companies and making fixed-income instruments relatively less attractive.
He, however, advised investors to remain focused on company fundamentals, earnings, cash flow, corporate governance and valuation rather than investing solely on expectations of declining interest rates.
On attracting more Nigerians into the market, Nga said investment needed to become simpler, safer, more affordable and easier to understand.
He called for stronger financial education, saying many Nigerians still viewed the stock market as an avenue for wealthy people or short-term speculation.
“We need to promote regular, disciplined investment as part of long-term savings and wealth creation.
“The ultimate objective should be to make investment in the Nigerian capital market a normal part of savings and wealth creation for millions of Nigerians.
“At 66, Nigeria has built the institutions and infrastructure of a modern capital market, but the next challenge is scale,” he said.
The investment expert further stressed the need to deepen the market, attract more quality companies and projects, mobilise the savings of millions of Nigerians, and deliberately channel long-term capital into manufacturing, infrastructure and other productive sectors.
“As Nigeria strives to build a one trillion dollar economy, the capital market should not remain at the margins of that ambition; it must be at the centre of it,” he said.(NAN)
Edited by Folasade Adeniran
English (US) ·