Nigeria’s capital market can finance infrastructure, experts insist

Experts and stakeholders in the financial sector have restated their calls on government at various levels, to take advantage of the multiple benefits inherent in the nation’s capital market to facilitate their respective infrastructure projects.

Reiterating the market’s capacity, the stakeholders warned that in an era of fiscal constraints, attention must focus on capital markets to provide the funds needed to finance energy, transportation and social infrastructure projects, beside the budget financing.

According to them, the nation’s infrastructure needs are too massive to be dependent on the meager yearly budgetary allocation.

They reemphasised that government must now prioritise the market as the most reliable medium to finance critical infrastructure, which already, is severally identified as the most challenging factor in doing business in the country.

Specifically, the Group Managing Director of Meristem Securities Limited, Sulaiman Adedokun, argued that the market has huge potentials, challenging the government to explore the potentials in the market.

“The market has huge potential. We are in a developing economy and there is huge gap to be filled.

The gap is so huge that the market will remain so much untapped in some areas.

”The capital market needs to be deepened more than this to provide an opportunity for growth in the economy. It is a barometer of growth and development in the economy. When the capital market is down, people believe the economy is down and this provides an opportunity for the government to grow the economy.

“The connection between the monetary sector and real sector is the capital market. No economy grows without the real sector and the real sector cannot grow without funds.

The funding of the real sector can better come from a long-term fund, that is, from the capital market.

“Funds can be raised from the capital market to fund various infrastructure projects in the country from a state of deficiency to a state of sufficiency. There is a lot to be done by the government in exploring the potentials of the capital.”

An independent investor, Amaechi Egbo, said infrastructure deficit has been estimated to cut about two percentage points from Nigeria’s Gross Domestic Product (GDP) yearly.

He pointed out that the capital market provides variety of financing instruments and investor categories, which could lead to larger pool of funds than other financing options.

According to him, capital markets can offer better pricing and longer maturities, as well as access to a wider investor base.

They can also offer funding for riskier activities, and by doing so, contribute significantly to innovation in an economy.

He added that the capital market is a critical pillar to long-term fund mobilisation needed for capital formation to fast-track economic growth and development in the country.

He maintained that the capital market is the market for securities, where companies and governments can raise long term funds, noting the main function of the capital market is to channel investments from the investors who have surplus funds to the investors who have deficit funds.

The President, Association of Stockbroking Houses of Nigeria, Patrick Ezeagu, also highlighted the capital market’s role in supporting the mobilisation and deployment of resources to fund infrastructure in Nigeria.

According to him, infrastructure deficit remains a major challenge to Nigeria’s efforts to achieve its full development potential.

He maintained that the nation’s capital market has the potential to fill the gap in infrastructure investment given the limited resources of government and banks.

Admitting that there is no single solution to Nigeria’s infrastructure needs, he noted that the most effective approach lies in mobilising funds that would finance critical infrastructure development through the instrumentality of the capital market.