October 19, 2021 / 4:55 PM / OpEd by Sola Oni / Header Image Credit: World Bank
I was a Rapporteur at the National Workshop of the Chartered Institute of Stockbrokers (CIS) at Transcorp Hilton, Abuja, on August 19, 2021. The Honourable Minister of Finance, Mrs. Zainab Ahmed, presented a lucid and detailed paper on how the Nigerian Capital market had in the past enhanced economic growth and development and the need to exploit such opportunities further. After her presentation, I wanted to ask a few questions but realized that she represented President Muhammadu Buhari to declare the Workshop open. Therefore, her address was like a priest's sermon, which could not be questioned on the pulpit. It is an ex-cathedral because the priest is believed to be under the influence of the holy spirit.
I knew that she might not be able to wait after the group photograph. But as a reporter, I needed to explore another option to engage Madam Ahmed on this rare opportunity before leaving the venue. Barely three minutes of my waiting at the main entrance of the Conference Room, the Honourable Minister, flanked by some of her aides, surfaced. I said thank you for coming, Ma, and your presentation was food for thought. She stared at me, and I quickly introduced myself and said. Still, your brilliant presentation has put many of us in a quandary on how the Federal Government underutilizes the capital market to fix the economy.
She was curious to hear more. Now that I have secured her attention, I have become the focus of the Minister and her team. I continued that over the years, the Federal Government doesn't consider stockbrokers' communique after each event. I submitted that if Government had implemented just 50 percent of the previous communique, the Nigerian Capital Market would have accelerated double-digit growth of the economy on a sustainable basis. I stated that the principles that underpin workshops and conferences of Capital Market Operators, especially the Institute and Association for Securities Dealing Houses of Nigeria (ASHON) is the nexus between the capital market and the economy and how the market can be utilized by the government at all tiers to finance capital projects, in addition to attracting corporate, institutional, and individual investors into the market.
Something Askew About Policies
I pointed out that the misalignment of fiscal and monetary policies undermines the integration of the money and capital market to the latter's detriment. I asked what the government is doing to create an enabling environment to encourage more participation of foreign investors, hedge funds, private equity firms, venture capitalists and pension administrators on the market.
I raised the issue of incentivizing quotable companies across various sectors of the economy to seek listing on the securities market, equitable treatment for all operators of commodities exchanges, efficacy of devaluation of the Naira in an environment of fragile export base, taming stagflation, forex scarcity, exchange rate volatility despite the Central Bank's intervention, a big question mark on the high cost of governance, funding of the frightening budget deficit of N6.26 trillion, latest forecast by the International Monetary Fund (IMF) that Nigeria's debt to GDP ratio might hit 42 percent in 2026, debatable assumptions of the 2022 fiscal budget, ding-dong legal tussle on the Value Added Tax (VAT), mounting unemployment and restive youths, pent-up anger for neglect, resulting into perennial agitation of different professional bodies in Nigeria, little or no impact of all sorts of empowerment programmes to lift 100 million Nigerians out of poverty, changing tactics of insecurity daily and the nagging issue of trust deficit in the government's economic permutations and models as all these undermine the patronage of the capital market.
Sukuk and its Success
I commended the federal government on issuing some tranches of Sukuk Bonds vide the Debt Management Office (DMO). Although the bonds are always oversubscribed, with the money required for capital projects, why is the government not considering more aggressive infrastructural financing through the capital market, given the apparent benefits of revenue bonds, a self-paying debt instrument?
I also reminded her about the securitization of debts to fund budget gaps as part of the strategy to address the government's ongoing physical and spiritual attack over its borrowing spree. Having noted that one of her aides was jotting my points, I urged her to also attend the Institute's Annual Conference, scheduled for Thursday, October 28 and Friday, October 29 at Harbour Point 4, Victoria Island with the Theme: "Capital Market as a Catalyst for Economic Development and Sustainable Growth", where experts will dragonize and proffer solutions, once again, to the factors that hinder the growth of Nigerian capital market.
It will also discuss how the market can be leveraged for economic growth and development. Sensing her positive body language about the Conference, I added that its objective is to build innovative conversations on "optimizing some capital markets elements to improve economic development and sustainable growth in Nigeria". I was emphatic that the conference shall focus on review of the controversial Petroleum Industry Act (PIA), Micro, Small and Medium Enterprises (MSMEs) as engines of economic growth and development, regulation and impacts of crowdfunding, Unclaimed Dividend, Fintech evaluation, and the capital market as the strategic forum shall produce a robust Communique on the way out of Nigeria's economic conundrum.
"Bubunomics" and Fiscal Stability
But I politely noted that some market observers had expressed concerns that the planned partial privatization of Nigerian National Petroleum Corporation (NNPC) may take ages to crystalize, going by the government's passive approach to the privatization of moribund state enterprises over the years. After almost 25 minutes, her aide, who took notes, looked unfriendly, indicating that I should round off. But I decided to risk the final comment. I said some analysts are wondering why the Federal Government downplayed the capital market in its economic planning, noting that some of the foreign loans, including Eurobond that the government was flaunting as cheap, were more expensive than revenue bond and that Nigeria was running "Bubunomics" where a high percentage of revenue goes for debt servicing with the risk of mortgaging the critical infrastructures to lenders. With fulfillment, I said, hope my humble observations shall find consideration and implementation space in the heart of the government. Her response has been non-verbal throughout.
She smiled at any point she considered as commendation but stylishly frowned at others. At this juncture, she thanked me and said my observations were appreciated and would be given immediate attention. As she was calmly leaving with her aides, I suddenly realized that I was in a light trance, but a remarkable one.
Oni, an Integrated Communications Strategist, Chartered Stockbroker and Commodities Broker, wrote from Gbagada, Lagos.