SEC’s 2019 Budget Seminar Explores Risks and Opportunities In The Nigerian Capital Market

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Wednesday, March 20, 2019 02.00PM / Ottoabasi Abasiekong and Bukola Akinyele  for Proshare WebTV

 

Hosting the 3rd edition of its Annual Budget Seminar, the Nigerian Securities and Exchange Commission (SEC) highlighted the sundry opportunities available to investors  in the Capital Market. 

The 2019 Budget Seminar had as its theme, “Budgets, Elections and Capital Markets; Risks and Opportunities in 2019”.

During the main presentation, the Head, Economic Research and Policy Management Division, SEC, Dr. Afolabi Olowookere spoke on the main policy posture of the 2018 Budget and what to expect in the 2019 plan.

 

Key Budget 2019 Policy Initiatives 

Analysing the 2019 Budget he listed the specific plans and initiatives of the Federal Government to include;

  • The Minimum Wage Increase
  • Recapitalization of Bank of Agriculture and Bank of Industry
  • Development of Special Economic Zones
  • Work on the Ibadan-Kano rail line, Eastern and Coastal lines
  • 1% of Consolidated Revenue Fund to go to Healthcare Sector
  • Restructuring of Joint Venture Oil Assets
  • Achieving 2.3mbpd Oil production
  • Increase domestic resource mobilization to bring down debt revenue ratios over the medium term.
  • Collect overdue oil license  &  royal charges
  • National Trade Window-Enhance Efficient Customs Collection


On the Policy environment Olowookere said the “Road Infrastructure Tax Credit Scheme” was a critical government step to address infrastructural challenges in the country.

Olowookere was of the view that the policy was a good way for listed companies to attract FG products into their facilities.

 

Risk Factors in Budget 2019 

Speaking on the risks to watch in the economy and capital market, Olowookere identified the following as areas to observe closely:

  • Nigeria’s GDP is still too low relative to the population growth rate
  • Disruptive technology and regulatory arbitrage are redefining markets and services
  • Conducts of future elections, especially sub-national elections need to be more transparent
  • Labour Congress reaction to minimum wage implementation needs to be tempered by fiscal realities
  • “Short-run” inflationary and unemployment pressure still persistent
  • Policy to fund minimum wage (VAT, devaluation and subsidy) may be implemented in 2019
  • Global trade tensions may adversely affect growth
  • Chinese slow growth may have contagion impact on other economies
  • US rate hike could lead to a slowdown of FDIs and FPIs
  • No-deal Brexit could ruffle the economic feathers of frontier and emerging economies

 

The Opportunities in the 2019 Budget 

In the midst of the challenging global and national economic landscape, the SEC research boss outlined opportunities for the capital market to include;

  • “Familiar” political and policy environment
  • Inflation decline and stable exchange rate suggest macroeconomic stability
  • Lower FGN domestic borrowing making room for private issuances
  • Opportunities exist for equities and sub-national issuances
  • Creation of money market-based instruments and trading
  • Commodity trading and derivatives
  • Financing infrastructure projects
  • Investing in eligible companies under tax credit scheme
  • Attracting restructuring oil assets to list in the market

 

He tasked State Governments to take advantage of the capital market in the area of sub-national issuances, which will provide long-term funding for infrastructure projects.

Olowookere also stressed that the management and implementation of the new minimum wage of 30,000 by the Federal Government, will be critical for the nation’s economy in 2019. 

The event featured a panel session with the following as discussants Professor Uche Uwaleke, Nasarawa State University, Professor Olu Ajakaiye, African Centre for Shared Capacity Building, Mr Johnson Chukwu, GMD Cowry Assets Management, Mrs Hajara Adeola, MD/CEO Lotus Capital and Mrs Toyin Sanni, GCEO Emerging Africa Capital.

 

Cardinal Panel Session Points 

The seminar had Mr Mobolaji Balogun, MD/CEO, Chapel Hill Denham as moderator, and a lively panel session which agreed on 6 cardinal points: 

  • The policies of the Federal Government should be pro-market
  • A Framework should be developed that attracts private capital into the Nigerian economy, to address issues like infrastructure funding
  • Federal Government should invest more in Education
  • The Private Sector and Capital Market Stakeholders should be proactive and constructively engage the government, with clear policy initiatives that will deepen the market and economy.
  • The Capital Market is a veritable platform that should be utilized by the State Governments for long-term funding of infrastructure projects.
  • There is need for the government to urgently address the liquidity in the power sector.

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