Securitise public assets to unlock liquidity, Teriba urges FG

An economist, Dr Ayo Teriba, has stressed the need for the Federal government to securitise public assets to unlock liquidity and boost domestic capital markets.

Teriba said this at the 13th yearly conference Investiture and AGM of the Institute of Capital Market Registrars (ICMR) held in Lagos at the weekend. He said the country would continue to witness revenue shortfalls and liquidity shortages unless the government securitise all public assets through the capital market.

Securitisation is a process of pooling assets and selling securities backed by those assets to investors. Teriba said unlocking the value of assets and enterprises through the capital market would not only attract more foreign direct investment (FDI) into the country but would also stabilise the economy.

He said the Federal Government currently holds more than 90 per cent of outstanding money market and bond market instruments but has none of its enterprises listed in the stock market, despite an extensive list of securitisable corporate, real estate and infrastructure assets.

According to him, while Nigeria has embraced debt issuance but failed to securitise any asset in the past year, countries like Saudi Arabia and Brazil have enacted laws to refocus their national financial strategy on asset securitisation and created an online platform for connecting these assets to global funding.

“Saudi Arabia has registered 200 companies including Aramco, and securitisation in the country has attracted up to $2 trillion. India has attracted $500 billion in FDI and listed up to 15, 000 assets in the stock market while Brazil listed more than 10,000.

“India reached $5 trillion market capitalisation with the stock market bigger than the nation’s GDP. Nigeria can be financially comfortable like Saudi Arabia and Brazil if we can do a fraction of what they have done in the areas of securitisation,” he said.

Teriba said the only way to strengthen the naira and ensure the stability of the exchange rate is to achieve foreign reserve adequacy by harnessing the potential for asset securitisation.

He also stated that Nigeria can replicate the successes of the GSM telephone network and the Liquefied Natural Gas (NLNG) project in rail tracks, pipelines, fibre optic cables and power transmission, which all require huge investments.

“Nigeria is extraordinarily rich in hidden government wealth/assets that can easily be securitisable. There are state-owned enterprises (SOEs) that we could list on the stock exchange.

“There are government-owned real estates that we could sweep into a securitisable pool that global institutional investors can fund as they do in other countries across the world. There are network infrastructure assets that are securitisable with special-purpose vehicles.” He urged capital market regulators, registrars and operators to work out modalities on how to woo the government to list its enterprises in the market.

The Director General of the Securities and Exchange Commission (SEC), Dr Emomotimi Agama, said there is a need to create a resilient economy that can turn domestic savings into investments to stimulate growth. He disclosed that the commission has concluded plans to boost the regulatory framework for venture capital and private equity firms to enhance their operational efficiencies and make them more attractive to investors.

Also speaking at the event, the Chief Executive Officer of the Nigeria Exchange Limited (NGX), Jude Chiemeka, said registrars must step up their collaboration with other stakeholders in the areas of financial inclusion and investors’ education on various products available in the market. He also stressed the need for registrars to invest heavily in technology to improve the standard of service delivery and participation of investors.

Earlier, the  President/Chairman of Council of ICMR, Seyi Owoturo stressed the need to stabilise the nation’s economy.

“This year, the Nigerian economy is expected to gradually pick up and deliver approximately three per cent real growth. Inflation is expected to remain elevated in the medium term, whilst forex exchange volatility remains a major pain point given the FX supply bottlenecks.

In the year 2023, the new administration in Nigeria implemented some pro-market reforms which appear to be tilting the balance of the economy in the direction of a private sector- growth model.

“The twin reforms of fuel subsidy removal and exchange rate unification caused a sharp depreciation of the naira. The depreciation in naira provoked inflationary pressures and led to a more restrictive interest rate environment that weighed on growth.
Furthermore, the country also experienced problems of FX illiquidity and loss of investor confidence. Consequently, Nigeria needs financial stability, economic growth and restoration of confidence in our economy.”

He added that the conference would assess the current national economic landscape; identify key challenges facing financial stability, propose policy recommendations  and suggest actionable policy measures to enhance financial stability.