Friday, December 05, 2019 / 06:00AM /
BukolaAkinyele for Proshare WebTV / Header Image Credit: NSE
At the just-concluded 2019 Nigerian Stock Exchange
(NSE) Essay Competition with over 40,000 secondary schools students across all
the 6 geographical zones in the country participating, Miss Adesewa Adeniyi
from Grandmates Secondary schools in Isolo, Lagos
emerged the overall winner and was given N500,000 in scholarship fund for university education,
N500,000 worth of equity investment and a laptop.
The NSE Annual Essay Competition is designed to bridge
the gap between classroom learning and creating a long term financial planning
strategy. Miss Adeniyi gave a full presentation of her essay at the
According to Adeniyi, the capital market helps to
channel surplus funds from small investors to institutions that can put to
productive use. In Nigeria, the capital market is primarily used for raising
medium term and long term funds to finance capital projects at the federal,
state, and local government levels in addition to private corporate entities.
Institutions of the capital market according to the budding
young investor, can be traced back to the colonial era, as the capital market
was used to regulate activities in the economy, helping farmers majorly in the
production of food and cash crops for export. Since then, the capital market
has been used to regulate the economy.
Speaking further, she added that the capital market
helps in channelling surplus funds from surplus spending units to deficit
spending units, through the issue of instruments. Also, she noted that the
stock exchange was a medium where investors could make money through the buying
and selling of shares.
She noted that fixed income instruments such as
Treasury bills and bonds are low-risk capital market investment instruments,
which range from 3-5 years and have relatively lower yields than riskier money
market instruments. Adeniyi said that when the investment instruments are
issued by federal government they are called sovereign bonds, but when issued
by state government they are called state bonds, when issued by the local government
they are called municipal bonds, and when issued by corporates or
companies they are called industrial bonds or corporate bonds.
The young award winner noted that when the word shares
are used they could equally refer to ownership of mutual funds, limited
partnerships or real estate investment trusts (REITs). However, the role of the
capital market cannot be underestimated in the general running of the economy,
which creates channels for productive investments that would yield high
The efficiency of the capital market, she said, occurs
when share prices reflect available and relevant information.
The growth of the capital market is a problem that has
proved difficult. She stressed that the capital market was one of the
compartments of the financial system that promotes investment in an economy.
Adesewa Adeniyi outlined the following as issues to be
addressed in the Nigerian capital market;
Issues Addressed In The
- Unstable market-The The Nigerian capital market has
faced severe downward fluctuation of prices in 2019, which has proved
unfavourable for local investors. She cited the example of the global financial
crises in 2009 and 2017; the last crises nudged Nigeria into a recession.
Adeniyi observed that the market was largely risky and unpredictable.
- Lack of Technology-There is a low level of information
technology assimilation in the capital market, according to the essayist. There
was a need to modernize operating models and encourage smaller investors to
invest in technology, as it leads to a more productive and effective market.
- Savings Setback Problem- She noted that Nigeria had a
low national savings rate of 10.79% as of December 2015. From the report
the Securities and Exchange Commission (SEC) Master Plan 2015-2025, it was
observed that a country like Malaysia had a national savings ratio of 32% while
the average for the world was 18.95% in the same period.
- The Market size problem- The SEC 2015-2025 master plan
report on the capital market stated that Nigerians seem to have limited
knowledge of the market, which is a big problem and could hinder the growth and
development of the long-term market for capital. Nigerians, according to
Adeniyi, should have basic knowledge of shares, alternative investments, and
bonds in the market.
Solutions To The
- Transparency and effective compliance in the capital
market- Leadership in the capital market, said the essayist, must accept the
rules and guidelines of the market. Complete compliance to regulatory framework
of the capital market should be encouraged to win the confidence of investors.
Disclosure of material facts such as the director's activity, shareholder
visibility must be done as when due and must be accurate and dependable.
- The problem of lack of information on matters as the
operation of the capital market could change by organising seminars,
educational workshops, events or television and radio talk shows to educate
Nigerians on the capital market. Also, curriculum in secondary schools and
tertiary institutions could be introduced to teach students at an early stage
on economic opportunities and how to invest in the market to increase their
- Entrepreneurs and business owners- Entrepreneurs can
also make use of the capital market for their sustainable business plans. By
publicly listing their company, they would adopt policies of transparency and regulatory compliance, which are key policy actions for
building enduring institutions.
1. NSE Highlights
The Importance Of The Capital Market In Achieving SDGs
2. NSE Interactive
Session Explores The Role Of The Capital Market In Unlocking Consumer Goods
3. NSE CEO Opening
Remarks At The CEO Interactive Session For The Consumer Goods Sector
4. HM Niyi
Adebayo's Speech At The NSE CEO Interactive Session For The Consumer Goods
5. Nigerian Capital
Market Enrolled 2.8m Shareholders For E-Dividend In 2019 -Mary Uduk, Ag DG, SEC
6. Domestic and
Foreign Portfolio Participation in Equity Trading - October 2019
7. NSE Wins Awards
for Promoting CSR Reporting and Delivering Efficient In-House Legal Support
8. Pearl Awards
24th Year Edition Holds In Lagos on November 24, 2019
9. ARAACAM Set to
hold its 2019 Annual Conference on November 26, 2019
10. FGN Reiterates
Commitment to Deepening the Capital Market to Attract Foreign Investments
11. NSE CEO's Speech
At 2019 Osun State Facts Behind The Economy