Leveraging capital market potential to accelerate growth
Capital market, globally, is one of the most important platforms for financial deals, particularly, in raising capital for economic activities in developed nations. In the United States, it is the life blood of capitalism where companies go to raise capital to finance the building of factories, airplanes, trains, ships, Communications gadgets, among other essential corporate activities, and to conduct research and development.
Indeed, over a trillion dollars are invested and exchanged daily in international capital markets across the world, and it is on record that many great innovations of mankind saw the light of the day through the instrumentality of the capital market.
For instance, it was through the New York Stock Exchange and collaboration with JP Morgan that Graham Bell was able to create the American Telephone and Telegraph Company AT&T, which became one of the largest companies in the world, with investments from all over the world. Also, Thomas Edison set up the Edison General Electric Company working also with JP Morgan in 1892. By 1900 using investments from all over the world, Morgan merged Edison’s company with Thompson-Houston Electric to form General Electric (GE), which is one of the largest companies in the world today.
Regrettably, the nation’s stock market, since the 2008 global financial crises, is still weighed down by neglect, crisis of confidence, illiquidity, low patronage, unfavorable operating environment, lack of incentives, fewer product offerings and inconsistent government policies.
Presently, increased volatility and illiquidity have continued to trigger persistent downturn in the Nigerian Stock Exchange (NSE), raising more questions regarding the end of the current weak performance.
Indeed, the persistent apathy and waning investor confidence that have bedeviled the nation’s stock market in the past few years continued to reflect on market indices and trigger persistent fall in share prices of listed firms as most bluechip stocks have fallen 10 year low.
According to the NSE, polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows, domestic transactions in the nation’s bourse decreased by whooping 66.68 percent from N3.556 trillion in 2007 to N1.185 trillion in 2018. Unfortunately, the capital market, which is supposed to be the parameter and growth enabler of the economy has been neglected and given little attention by the government.
Analysts and investors admitted that the industry regulators have struggled to restore investors’ confidence in the capital market. However, they argued that more is needed on the part of the government through initiating appropriate policies that would support the capital market, surpass the previous peak performance, drive job creation and spur national growth.
For the Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion, it is a plus for the economy when more businesses are listed on exchange because the mechanism of the capital market remains a veritable source of wealth creation and distribution, with a tremendous capacity to catalyse economic development. “The Federal Government should intensify privatisation exercise in order to properly determine the direction of the economy and revolutionise the capital market.
“It was the privatisation of Ashanti Goldfield, one of Ghana’s economic main stay that brought the Ghana Stock Exchange to the world stage.“Ashanti Goldfield represents 65 per cent of the market capitalisation of Ghana Stock Exchange and is also listed on the New York Stock Exchange (NYSE), London Stock Exchange (LSE) and JSE of South Africa,” he said.He stated that a transformation agenda without new and radical policy measures would only remain an illusion to be pursued, but never achieved.
President of Constamnce Shareholders Association, Mallam Shehu Makail, said some of the reasons local businesses fail to list on the exchange is because government has failed to do the needful by addressing issues confronting the economy so the market can improve.He pointed out that the phrase “start local, think global” would be apt for a campaign by the regulatory authorities and government to attract local businesses to list on the stock exchange.
This is because it captures the spirit or mentality, which gave rise to most multinationals, who now operate and generate tremendous multiplier effect in their various host economies.
“There are numerous benefits of listing companies on the stock exchange. Besides it is cost effective to raise capital in the market when compared to the money market. It is also easier for listed companies to access capital from both the existing shareholders and the public. “In the past also, a lot of listed companies have been able to raise what would pass then, as mega funds, through the capital market. The Nigerian capital market has the capacity to absorb mega offers if the timing, ratios and marketing are right.
“Being listed also creates mergers and acquisition opportunities with the listed companies using their own stock, whereby a company stock currency.“Other benefits include the enhancement of the company’s market value which can easily be determined. It also provides a medium for inflow of foreign portfolio investments.
“The Federal Government is advised to take heed to the recommendations of the various bodies in the capital market and adopt, as well as implement strategic policies for the maximum utilisation of the potential of the capital market towards realising its transformation agenda,” he said. He added that Nigeria can enter the new age economy through the instrumentally of the capital market.
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