How to resuscitate nation’s capital market, boost liquidity
Worried by the increasing liquidity constraint that has gripped the nation’s capital market in the past few years, stakeholders in the sector have listed ways to resuscitate the market to become a platform for capital formation and mobilisation of savings for huge project investments.
The participants spoke at the 2nd yearly capital Market Summit of the Association of Stockbroking Houses of Nigeria (ASHON), held in Lagos, at the weekend. They bemoaned that the nation’s capital market percentage contribution to the gross domestic product (GDP), which gauges the economy’s health is low when compared to other emerging markets.
Furthermore, the stakeholders decried that the oil and gas sectors, particularly the upstream exploration and production, are narrowly represented in the market, stressing that the stock market is currently in dire need of a broader variety of stock options
According to them, unless government expedites actions aimed at providing development clauses that will enable privatised firms to list on the Exchange within a specified period, the issue of illiquidity would continue unabated in the market.
They suggested that government should provide appropriate incentives to woo multinationals in the telecoms, and oil and gas sectors to deepen the stock market and boost retail investors’ confidence and participation in the market.
For instance, the former governor of Anambra State, Dr Peter Obi, criticised the nation’s privatisation model, which he said failed to provide a clause for the privatised firms to list on the Nigerian Stock Exchange (NSE).
Obi, who is also the former Chairman of the Securities and Exchange Commission (SEC), maintained that the size of the capital market is too low for the nation’s GDP.
He urged government to introduce policies that would deepen the market through privatisation of assets. “We are the only country that privatised wrongly. We privatised profit and share losses. We should enact a policy that set limit. These institutions should go to the market and raise funds.
“Today, we are borrowing from China to build airports. Go to South Africa, India, Turkey, they raise funds from the capital market to build infrastructure. These are institutions that are deepening their market.
“In other jurisdictions, government supports them to go and raise funds from the market. I am saying get these assets and sell to the public. All the money you put into power, let them go to the capital market, it will be more efficient.
“We need to get it right what is happening in other countries. How many ICT companies are quoted on the Exchange, how many are being encouraged through appropriate regulations to quote? Even those already listed are trying to leave because there is no benefit for quoting.
“In most jurisdictions there is benefits and support for quoting. There should incentives for quoting. There should be a policy direction, for example, at the point of privatising power assets, there should have been a policy that said, this should be to core investor, institutional investors and then the capital market,” he said.
The Former Managing Director, Central Securities Clearing System (CSCS), Kyari Bukah, noted that privatisation in other emerging countries are done in such a way that 20 or 25 per cent of these entities are listed automatically in the stock market.
“Why are the transactions and portfolio investors not coming, in most countries, during privatisation, 20 or 25 per cent of the privatised firms get listed automatically in the market. The people have capital market as a reserve and they will have the appetite to say we want to embrace the capital market.”
The Director General, Debt Management Office (DMO), Abraham Nwankwo, urged operators to mobilise funds among them and facilitate capital raising in the market.
“Let operators look inwards and ask what can we do to get ourselves out of these challenges? What stops operators from mobilising funds and start working on these infrastructure and other projects on their own?” he asked.