Stories by Chinwendu Obienyi
To create a window of opportunities for investors in the Nigerian capital market (NCM), the Federal Government has embarked on aggressive export base diversification to reduce vulnerabilities to external shocks and provide fiscal incentives for companies listed on the Securities Exchange.
According to market experts, this is relevant to the growth of the capital market given the impact of the COVID-19 pandemic on global markets.
Speaking on the theme; COVID-19: Impact and opportunities for the NCM during the Capital Market Correspondents Association of Nigeria (CAMCAN)’s 2020 Annual Workshop which held in Lagos at the weekend, financial economist and Professor of Capital Market at Nasarawa State University, Keffi, Professor Uche Uwaleke, noted that the impact of the COVID-19 pandemic caused severe bruises to economies worldwide.
He explained that, even though the Nigeria’s GDP currently stands at -3.62 per cent, its stock market have rebounded following the restart of the economy, low yields in the fixed income market as well as the Central Bank of Nigeria (CBN)’s policies and growth support measures-reduction in Monetary Policy Rate (MPR), Loan to Deposit (LDR) ratio of 65 per cent redemption of matured OMO Bills and a raft of interventions covering the real sector.
While stating that weak macro economic performance tied to international crude oil price, over exposure to foreign investors poor savings mobilisation, infrastructural deficit and widespread insecurity as legacy issues affecting the performance of the capital market, Uwaleke noted that the outlook for the NCM’s post-COVID 19 era is positive and added that the economy is likely to recover in the first quarter (Q1) of 2021 once the government implements what it has in its economic sustainability plan.
According to him, the containment of COVID -19 and the unlikely possibility of another lockdown will further boost the market.
“The Passage of PIB with potential for more investments in the petroleum sector, the Police reforms following EndSARS protest will improve security while Exchange rate unification will likely improve foreign investments and forex market liquidity
Also, Finance Act 2019 provisions on REIT, securities lending, and graduated CIT that favours small and micro enterprises, Finance Bill 2021 provision on unclaimed dividends has the potential to address the growing number of unclaimed dividend and boost market confidence while planned reopening of the borders will reduce inflation rate”, he said.
Giving insights as to how the capital market could survive the second wave of COVID-19 which might lead to possible collapse in international crude oil price, depletion of external reserves and exchange rate pressure, he urged the Federal Government to pursue aggressive export base diversification to reduce vulnerabilities to external shocks and boost external reserves.
“The government should provide fiscal incentives for companies listed on the securities exchanges and partially privatise government assets such as the NNPC through the NSE and deploy proceeds to recapitalise Development Financial Institutions such as BOI and BOA”, Uwaleke said.
Corroborating him, the President, Institute of Capital Market Registrars (ICMR), Seyi Owoturo, advised the Federal Government to chart new ways of moderating or balancing the effect of inflation on real returns of investments in the capital market.
Also speaking, the Vice President, Market Architecture, FMDQ Securities Exchange, Jumoke Olaniyan, noted that the government needs to do all it can to ensure the recovery of the economy by Q1 2021 is feasible.