‘FG must reposition capital market to accumulate global savings’
The Managing Director, Chief Economist Africa, and the Middle East, Global Research, Standard Chartered Bank, Razia Khan, argued that Nigeria is in dire need to borrow from the savings crew available abroad to finance growth.
She said: “The capital market is the means of making that borrowing take place, but for the moment, the fixed income market is not seeing the flows it could easily be seen because the interest rate is at a too low a level.
“Everyone realises that this is a short-term crisis measure and that at some point, there would be an adjustment to the current low-interest rate environment. What are the consequences to local asset managers, where are the local fixed income participants going to be when that correction happens?”
She continued: “A large amount of liquidity is being pumped into the economy by global central banks as part of crisis response and this will be good for emerging markets as this liquidity finds its way to investible jurisdiction,
“The problem is, with Nigeria headline inflation and depression in bond yield, as low as they are and a question of how freely and smoothly functioning the foreign exchange market is. This is not necessarily an environment where a foreign portfolio investment into the bond market is going to come back in an especially strong way,
“There is a need for a gradual process of coming back out of this to make the Nigerian market more attractive to attracting savings from the rest of the world again.”
She stressed the need for African countries with any amount of external debt to leverage the current tight credit spread due to the constraining state of Eurobond to refinance their existing debt obligations.
In terms of the Eurobond market, she said there is still a focus around the growing debt ratio across the sub-Saharan Africa region. Eurobonds spreads have tightened very significantly; this is a consequence of the global liquidity level.
“For any country with any amount of external debt, it will be a missed opportunity not to take advantage of the current tight credit spread to totally refinance some of the existing debt obligations,” she said.
Recall that market operator had recently decried the government’s neglect of the capital market over the years,
For instance, the Vice Chairman of Highcap Securities, David Adonri, said the ruling party does not have any strategy for tapping the full potential of the market to finance economic development in Nigeria.
‘They treated the market with levity and indifference; the mid-term plan to revive the economy is hollow. They do not fully understand the importance of the capital market as the tool for mobilising funds to finance all areas of the economy, in order to catalyse wealth creation and generate productive employment.”
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