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Unveiling capital market’s place in infrastructural financing


‘The effective and efficient utilization of capital market facilities would enhance federal and states governments’ financing of their respective 2018 budgets to address their huge infrastructural deficits,.’



All over the world, the capital market drives the entire economy, as it provides a platform for government at all tiers to access medium and long-term funds to execute development projects, a progress Nigeria is part of.

Similarly, companies also utilize the market to beef up their capital base and expand generally, while individuals take advantage of the market to do capital formation.

However, the situation in the Nigerian capital market is ironic as the market is grossly underutilized relative to its absorptive capacity. The back-seat approach of the capital market operators has not helped matters. Perhaps, the time has come for total review of the government’s anti-market policies for enhanced use of the market to finance the huge infrastructural deficit, which has become the bane of Nigeria’s economic maagement.

In real sense, the market is expected to measure or reflect the climate of the economy, but it appears not to be doing enough because when one looks at the various state governments and asks himself what is the size of their funding of capital projects coming from the Nigerian Capital Market (NCM), one will realize that their input is utterly inadequate. If the governments approach the Nigerian Stock Exchange (NSE) exclusively to fund capital projects, which are also income generating across the federation, then a lot of them would not be running government affairs the way they are running it the present time. Some of the state governments are unable to pay workers’ salary, yet others use abandoned capital-intensive projects as benchmarks to seek re-election, among many other maladies.

There is much to be done in the capital market as far as the nation’s economy is concerned. Instruments in the capital market, if optimally utilized can bring the desired transformation we need across all sectors of the economy in the country.

For instance, the Adamasingba Stadium with a shopping complex built around it in Ibadan, the capital city of Oyo State, was built for less than N30 million. If we, therefore, have governments who are sincere to the market regulations and have capital projects tied to the monies raised from the market, which will generate incomes in the future, both the economy and the citizenry will reap immense benefits.

There are major roads that are in deplorable conditions and require urgent government attention. If such road projects are funded from the stock market, they would be developed to reasonable levels or even entirely completed rather than the many cases of abandonements.

A foremost Equity Analyst, Nornah Awoh, in a chat with our correspondent, said there are potentials in the Capital Market that both federal and state government can tap from.

He stressed there are lots of governmental organizations that are not making surpluses, not because the businesses they are involved in are not viable, but because of the high cost of funds sourced from outside the capital market.

In the case of the retail end of the market, just before the bubble burst in 2008, interest in the nation’s capital market was high, simply because of the high returns investors could garner from quick profit-taking activities.

According to Awoh, every market has its own cycle; the capital market going down did not mean that it should be abandoned, because “there will always be an upward swing again along the line. What is missing in the market is the knowledge gap. For those that got their fingers burnt in the market during 2008, 2009, and 2010, and refused to return to the market; you cannot blame them. But the ultimate thing is that more and more Nigerians need to participate and play the market if we really want a nation that is progressive and developed because you need those long-term funds to grow the market and in turn, grow the economy.”

The market did close the year 2017 on a positive note, and as of end of February 2018 up till the second week in the month of March; the market was also on a positive trend approximately a little over 14 percent gain as at Wednesday, March 7th.

So, the market is still on the upside despite the occasional hit when it is goes into a reverse trend on the gain earlier recorded. However, such is inevitable because no stock market is always on the upward trend, when it comes to volume of transactions and price movements. No market is permanently up or down. What makes the market is the ability to move in terms of the prices; the market’s lead indicators such as the All-Share Index and Market Capitalisation will swing up and down from time to time.

Moreover, looking up to foreign capital and investors for hefty participation in the market may not always be advisable. According to Awoh, foreign participation is welcome, but he asserts that it becomes a concern if foreign investors become a dominating factor in a market such as Nigeria’s. For instance, when foreign players in the market hold up to 50 percent stake, that becomes a challenge, because anytime there is policy that seems not to be favourable to foreign players, there will be movement in large numbers away from the market. And that becomes a big challenge for the local players (investors). There is, therefore, a need for the government to encourage local investors to play a more critical role in terms of the proportion of the market they hold.

Meanwhile, it’s difficult to say whether or not the recent surge in the market will be sustainable, because government policies and decisions, which are far from being predictable in this clime, will have profound effects on the market, positively or negatively. For instance, should government decide to abrogate withholding tax, yields in the capital market will definitely rise, and there will be an increased attraction to investors, which will invariably cause an upward swing.

However, founder and Investment adviser of the AOE Investors’ Club, Akingbe Olatunji, on his part, posited that most of the money to be made in the stock market has already been made, as most of the stocks have become fairly or fully valued; he stressed that true investors are already cashing out from stocks and are either holding their money in cash or Treasury Bills until another opportunity to enter the market presents itself.

He observed that the implication of investors crashing out of the equity market for the economy is that “we are likely to see an increase in the demand for fixed-income investment instruments.”

According to him, the market always serves as a barometer of the economy, but sometimes, there is a lag between what happens in the market and in the economy. “The fact that there is lull in the market presently does not mean that the economy is slowing down. What is currently happening in the market has more to do with the emotions or perception of most of the operators in the market rather than with the economy.”

Further reacting to T & T News’ probe on happenings around portfolio investors in the market, Akingbe said he believed that foreign portfolio investors are gradually removing their funds from the market.

“For the foreign portfolio investors, that may be a factor. But as far as I am concerned, I see it as more of ‘I have made good profit why risk it in a market where the opportunities are not as attractive as it used to be.’”

Head of Trading, Apt Securities and Funds Limited, a Member of the Nigerian Stock Exchange (NSE), Kayode Jamiu, stressed the importance of investor confidence and education as keys to getting the desired stock market in the country.

According to him, “in this market, let us build confidence; if the foreign investors can see the kind of confidence we display in this market, they will surely come and push up the market. And we can as well do it better by ourselves. There is no way we should allow foreigners to be controlling our capital market.

“I will enjoin the domestic investors to make sure that they invest in this market because these stocks trading at battered prices before are now getting better, and it is the best period for investors to take positions. Such investments are also advisedly to be made long-term and not short-time. They should engage in value investing, which means that you invest in stocks that have strong fundamentals.”

All said and done, the yet shallow Nigerian capital market, like any other bourse in the world, is a veritable means of raising cheap, long-term developmental funds and trading for both government and retail players, alike.


About Lanre Oyetade

A multiple award winner in Economics and business journalism, Lanre Oyetade has served close to two decades in the media industry, spanning different notable stables, where he is privileged to have risen to the position of a title editor. A masters degree holder in Economics from the University of Lagos and doctoral student at the Babcock University, he is a winner of the prestigious NMMA Capital Market Award for two consecutive years (2004 & 2005), and was also a nominee for the body’s banking and finance and money market awards for two years. In 2013, he also won the Most Outstanding Business-Reporting Title Editor award of the National Institute of Marketing of Nigeria (NIMN). A minister in the LORDS’s vineyard, he has been an inspirational speaker and resource person at many corporate and religious fora since early 2004, and has so far authored three books on the capital market; on personal effectiveness, and on personal finance, in 2008 and 2014, respectively.