Experts canvass infrastructure finance through capital market
Financial experts have underscored the need for government to work out modalities on how to boost investment in infrastructure through the creation of activities that will engender effective long-term funds from the nation’s bourse and attract foreign direct investment (FDI) into Nigeria.
The experts, who spoke at the public presentation of a book titled; ‘Frontier Capital Markets And Investment Banking: Principles and Practice from Nigeria,’ in Lagos, on Tuesday, argued that the kind of capital that currently exists in Nigeria is more like ‘hot money’, which are not appropriate for economic development.
Hot money is the flow of funds (or capital) from one country to another to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called ‘hot money’ because they can move very quickly in and out of markets, potentially leading to market instability
According to them, Nigeria is currently in need of FDIs as well as long term funds to grow the real sector, and accelerate infrastructure development across the priority sectors of the economy.
Furthermore, they submitted that efforts at attracting FDI to grow the economy may not yield the expected results unless government and relevant agencies create strong legal policies and frameworks.
Specifically, the Director, Centre for Economic, Policy, and Research, University of Lagos, Prof. Ndubuisi Nwokeoma, urged government needed to focus more on the capital market where long term fund can be raised to finance infrastructure and other capital projects.
Nwokeoma said: “The kind of capital that we have in Nigeria currently is more like a portfolio, which is like hot money. Hot money is not good for the development of the economy. For the economy to grow we need FDIs, we need to invest and attract long term funds so that we can grow the real sector, without which the economy cannot experience meaningful growth.”
He added that the book is topical, as it emphasizes the need “to revive the principles and practices of investment banking in market operations, to enhance the growth of investment funds.”
Also speaking, Prof. Konyi Ajayi, said there is a need to improve the legal framework to attract huge investment in frontier markets. He argued that “The law has not caught up with market realities, and market reality is one of creative disruption. We have new forms of money that are coming and coming very fast. The nature of business is changing, we must do all we can to help industrialization in the country, help made in Nigeria. The reality is that there are new ways of doing things, and therefore there must be new ways of financing, so the law needs a lot to do.”
Also contributing, the Managing Director of Vetiva Capital,
Chuka Eseka, said Nigeria needs to deepen access to financial markets to drive infrastructural development.
“The book also explores capital raising through debt underwriting and private equities with details on the workings of mergers and acquisitions, infrastructure, projects, and real estate financing within the framework of securities brokerage, asset and pension management. It concluded by saying that the five ingredients to development are essentially institutions, incentives, inclusiveness, innovations, and investment,” he said.