Fiscal Incentives and Enabling Regulations Would Improve the Nigerian Capital Market in 2021

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Tuesday, January 12, 2021 / 1:09PM / Ottoabasi Abasiekong for WebTV /Header Image Credit: WebTV


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Fiscal Incentives by the Federal Government and enabling regulations by capital market regulator the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN) would improve activities in the Nigerian capital market in 2021.

 

Professor Uche Uwaleke of the Nasarawa State University, Keffi, said this in a recent discussion on "Nigeria's Capital Market in 2021:Opportunities and Risks".

 

The scholar acknowledged the bullish performance of the Nigeria Stock Exchange at the end of 2020, closing with a year-on-year growth of 50.03% and achieving  a 40,270.72 basis points value.

 

The markets growth was ascribed to the pro-growth monetary policies of the CBN, the  raising of the banks loan-to-deposit ratio (LDR) and maitaining a low-interest rate regime which affected fixed income market yields and led to a renewed appetite for equities.

 

Uwaleke was optimistic that the CBN would continue its accommodative monetary policy in 2021 which would see  low yields in the fixed income market and increased activities in equities.

 

Speaking further he noted that a stable macro-economic environment was vital for the economy and capital market to gather momentum and achieve value creation.

 

According to the capital market specialist strong fiscal incentives should be in place to encourage more activities in the equities market, especially in formalizing the informal sector like agriculture, which may see more companies in agri-business being listed on the NSE.

 

He noted that currently the NSE has about 166 companies listed on its trading floor a number that needs to improve in 2021.

 

On the demutualization of the NSE, Professor Uwaleke lauded the move believing that it would help to improve corporate governance, increase capital formation and enhance global visibility and competitiveness for the Exchange.

 

Reviewing the debt market Uwaleke stressed that only states that have steady internally generated revenues (IGRs) and healthy debt profiles should access the market alongside private companies.

 

Uwaleke decried "funding mismatch" or a situation where states apply for and get short-term loans from banks to address long-term projects which include infrastructure, healthcare and education.

 

He reiterated the need for the CBN to carry out measures that could discourage the banking sector from providing short-term loans to state governments.

 

The capital market, according to him, remains the platform for mobilizing long-term capital to address long-term projects, and he called for increased sensitization and awareness amongst states on the benefits of leveraging the long-term debt market.

 

He cited Lagos  as an example of a state that has continued to access the long-term debt market, because it has developed the headroom and capacity to repay through its IGR.

 

The capital market analyst noted that the growth and development of the FMDQ Group (Debt Market, Fixed Income ) and the NASD Plc (Unlisted OTC Securities market) since 2013 was consistent market progress and with regulatory support they would improve both market breadth and depth.

 

Commenting on the Commodities market, Uwaleke called for the speedy passage and signing of the "Warehouse Receipt Bill" which would improve activities in the market. He also added that addressing issues around infrastructure, transportation/logistics and standardization are areas that would give fillip to the market.

 

He proposed a partial privatization of the Nigeria Commodities Exchange (NCX) which is currently operated by the Federal Government and welcomed the Lagos Commodities and Futures Exchange (LCFE) which would join the likes of AFEX Commodities Exchange to support Nigeria's revenue diversification drive through the development of the agriculture and solid minerals sectors.

 

Concerning the Unclaimed Dividend Funds provision in the Finance Act 2020 which has generated a lot of discussion in the country, he called for a holistic approach which would require an "Unclaimed Assets Act" that would be broad and carry along all stakeholders.

 

He said countries like United Kingdom and Kenya have clear laws that guide the management of unclaimed assets.


For further enquiries or comments on this news story contact Ottoabasi.abasiekong@proshareng.com.


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