‘Why Nigerian capital market fails to drive economic growth’
Capital market shareholders have identified low patronage, unfavourable operating environment, lack of incentives, fewer product offerings and inconsistent government policies as factors inhibiting the growth of the nation’s capital market and consequent contributions to the economy.
The investors, who bemoaned the shallow knowledge of rudiments of the market, regretted that the capital market, which is supposed to be the parameter and engine growth of the economy has been neglected and given little attention by the government.
They argued that the economy reflects the capital market and vice-versa, because Nigerian economy is the outcome of commercial activities in the country, even as the market remains a critical hub for commercial deals and parties to such transactions.
Therefore, they suggested that enlightenment on the benefits of the market must be intensified, considering the fact that only five per cent of the nation’s population of over 200 million participates in stock market.
The shareholders also underscored the need for the regulators to create more products that would broaden the market and make it compete favourably with other exchanges across the globe. Due to the recent catastrophic fall of capital market, rapidly declining Foreign Direct Investment (FDI) and scarcity of investment opportunities, investors in the nation’s capital market are crying out for an innovative and versatile financial product such as derivative securities for hedging and market expansion.
Specifically, the Managing Director of Constance Shareholders Association, Mallam Shehu Makail, said the federal and state governments should float bonds while private sector operators should introduce other sophisticated instruments such as derivatives, securitization among others.He also emphasised that government must encourage more private entities to be listed on the exchange by granting tax holidays and patronizing the SMEs products.
He added that the cost of raising funds should be reduced to encourage companies to source funds from the market to finance long-term projects.The Managing Director of New Dimension Shareholders Association, Patrick Ajudua, said: “The capital market is being affected by several factors: unfavorable business environment, unstable oil prices, economic recession, global foreign exchange instability & inconsistent government policies.
“When all these variables are addressed by the government, the capital market would be enhanced to act as a catalyst for growth and development of the economy.”The Publicity Secretary of the Independence Shareholders Association of Nigeria, Moses Igbrude, said the capital market drivers the economy of countries that recognises the relevance of the sector to economic growth.
“The Nigerian capital market has failed to play the role of key economic drive because all the stakeholders have failed to play their various roles as expected. “The Federal Government with those empowered to pilot the affairs of the country seem not to understand the importance of the capital market not to talk of how to use it to accelerate economic growth.
“They consistently initiate unfriendly policies. Again high cost of funds, multiple foreign exchanges, porous borders that allow free flow of imported goods to the detriment of local industries are still in existence in the country. “