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‘How to expand debt capital market for sustainable GDP growth’


Capital market stakeholders have stressed the need for maximum collaboration between regulators and operators in an effort to support debt issuers to double the size of the market in the short to medium term for enhanced gross domestic product, GDP.

Besides, they suggested that the federal government must reduce activities in the domestic debt capital market to avoid crowding out the corporate and sub-national segment.

It is believed that if the nation’s debt capital market (DCM) was expanded, there would be effective mobilisation and allocation of financial resources to fast-track economic growth, since banks are not willing to offer long term facilities for businesses or execution of capital projects.


DCM is a market for trading debt securities for specified interest, where companies and governments can raise long-term funds through private placement or organised markets and exchanges. The market will work with a client to organise borrowing and to help provide access to a global pool of investors, who are looking for opportunities. Debt is often used as it is usually cheaper than financing through equity, and can add diversity to funding

Accordingly, government and corporate entities can raise long-term capital through a debt issue for financing new projects, expanding and modernising industrial and commercial firms to boost industrialisation.

A debt issue is a fixed corporate or government obligation, such as a bond or debenture. It is a financial obligation that allows the issuer to raise funds by promising to repay the lender at a certain point in the future and in accordance with the terms of the contract.
In addition to boosting the nation’s GDP, stakeholders argued that if the debt capital market was increased, it would also make the market more competitive globally.

Specifically, the Managing Director of United Capital Plc, Mrs. Oluwatoyin Sanni, in an interview with The Guardian, explained that Nigeria cannot expand its debt capital market without stable and lower interest rates with stable foreign exchange regime.

According to her, there must be policy stability to transform Nigeria’s well known economic potential into reality for the benefit of the people and various market participants.

“The Debt Capital Market will benefit from stable and lower interest rates on the shorter end of the curve. There must be stable and predictable foreign exchange regime and reduced activity by the Federal Government in the domestic debt capital market to avoid crowding out the corporate and sub-national segment.”

She added that the Debt Market can be expanded further by development of a healthy national savings culture.

Sanni, who put the current size of the nation’s debt market at $27billion in a recent forum in Lagos, lamented the huge gap in the nation’s market, when compared to other African markets like South Africa with a market size of $132billion.
She noted that if all institutional investors played their respective roles, it would double the size of the market’s contribution to the nation’s GDP.

“There is a huge gap and capacity for growth when we compare the size of our market to its peers. If we look at the size of the market, we can double this size in the short to medium term if we get our axe together as a market; the regulators working together with operators and supporting issuers.

“One critical issue here is governance, which would give investors confidence and makes it easier for us, because all over the world, it is accepted that the best run companies ultimately are the most profitable,” she added.

An independent investor, Amaechi Egbo, reiterated the need for the country to address the issue of interest rate, saying: “If the interest rate is high, no one would want to issue debt instrument because you float debt instruments to have a reasonable cost and if that is not stable, no profit. If interest rate is high, the sustainability becomes high.

“Again, our issuance process should be shortened. The rating agencies should rate companies ahead of time, there is issuance time, and you cannot issue a bond without timing. We must ensure that we make it more attractive for investors going forward,” he added.


The Managing Director, Global Credit Rating Company Limited, Adebisi Ajiboye, argued that the major factor impeding the growth of the nation’s debt capital market is liquidity.

He therefore stressed the need for an urgent establishment of an independent discounting debt instrument institution, where bond instruments can be disposed in an open market to enhance liquidity.

“Liquidity is the major risk issue here. The issuers would want to know if there is any available buyer at any time in case he wants to dispose of the bond and how do I sell, where is the open market for me to sell to make up my money. The independent discounting instrument will give investors some level of confidence in this regard.”

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