Why The FG Needs to Drive Pro-Market Policies - Prof. Uche Uwaleke


Friday, March 22, 2019 3.35PM / Bukola Akinyele for Proshare WebTV


Speaking at the just concluded 3rd edition of the Securities and Exchange Commission (SEC) 2019 budget seminar in Lagos, Prof Uche Uwaleke of the Nasarawa State University gave insights into why the Federal government needs to drive Pro-Market Policies. 

The Nigerian Professor of Capital Markets who was a panelist at the budget seminar, believed driving market policies was crucial to a vibrant economy. 

Reviewing the 2019 budget, he categorized it into Four E’s stakeholders must take into consideration in their analysis. 

The first E according to Uwaleke is Expenditure citing Adolf Wagner who was of the view that public expenditure must continue to grow at a steady pace. Speaking further he also mentioned Jack Wiseman and Anapaecock who both stated that at the worst case in terms of public spending, governments should retain or maintain the previous year’s budget. Expenditure according to the scholar is expected to move in a stepwise fashion. 

He said “Whenever formulating budget it is important to recognize that we don’t need to cut the amount we spend relative to the previous year”. 

Speaking further, Uwaleke asserted that as much as possible when formulating budgets, budget mangers should ensure that they hold exchange rate and inflation rate constant to maintain a steady rise in public spending. 

According to him, the second ‘E’ is the Embodiment or the composition of the expenditure itself. The University Don said about 1.8%  of the GDP represented capital spending in the last three years, acknowledging  it was good that Nigeria has maintained a minimum of 30% expenditure for capital. 

“It is not just about capital spending, but it is the quality of that capital spent. When you spend 58% of your budget on furniture and fittings  or long-lived assets which is grouped as capital expenditure you spend on assets that are not developmental” Uwaleke said . 

He noted that developmental expenditure is expenditure on roads, schools, hospitals, and railways that will have positive growth impact on the economy. The quality of capital expenditure is important he insisted. 

According to the University don, the third  ‘E’  is entry which is  the content of the budget itself. Some countries recognize the fact that it is important to include pro capital market measures in the budget while some don’t. Those that include pro capital market measures in their budget have a seeming correlation with  capital market growth. 

Giving further insight, Uwaleke identified countries like Pakistan and India as examples of nations with pro-market budget policies. Pakistan talks about reducing company income tax (CIT) for firms listed on the Stock Exchange, while  India talks about privatization through the Stock Exchange. 

He explained further, that in 2018, there was  talk about raising N300billion from privatization proceeds but nothing came of that goal. 

Uwaleke argued that, if Nigeria must privatize through the stock market to make impact in the economy,  “It is important that when we formulate budgets to introduce pro capital market measures that will have direct positive impact on the economy” he said. 

The final ‘E’ according to Uwaleke is  Execution or implementation. One major issue of concern for the Professor of Capital Markets is budget implementation. 

Budget delays he said have no doubt had adverse impact on the budgetary process and the economy. Uwaleke said for example, if you look at what happened in 2018, in 2017 the market returned between 40% and 42% performance which was one of the best in the world but this turned around sharply in 2018 as the market fell 17.8%. 

The capital market scholar emphasised the need for Nigeria to return to the normal budget calendar that is provided for by section 3.1 of the constitution, which clearly states “The budget year should run from January to December”. 

He called for enforcement of the Executive Order 003 that talks about patronizing locally made products, because it will impact positively on the capital market especially if patronage is tweaked in favor of companies that are listed on the bourse.


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