Experts seek local institution for capital formation
Worried by the high level of illiquidity that has bedeviled the nation’s capital market in the last few years, capital market experts and stakeholders have called for the establishment of a local institution to Cartier to the needs of capital formation, as a way to grow domestic investment capacity.
Capital formation is the mobilisation of savings through banks, investment trusts, deposit societies, insurance companies and capital markets.
According to stakeholders, in a chat with The Guardian, the creation of such organisation would spur expansion of local institutional investment capacity to attract more retail participation and stimulate activities in the primary market segment.
The stakeholders pointed out that if local institutions were expanded, they would generate savings within the country, there by substituting foreign capacity.
The Chairman of NASD Plc, Olutola Mobolurin, pointed out that local private equities and venture capital should be promoted to get more Nigerians into business and reduce unemployment.
According to him, more needs to be done to enable the nation’s capital market compete favorably in the global market.
“Growth comes from investment and investment from savings. Foreign investors are tapping from the savings of other people. We must initiate policies that encourage savings and woo Nigerians in diaspora to bring their money and save in Nigeria.
“A lot of Nigerians savings are abroad. We must encourage domestic investment, so that people that have money outside the country will bring it back home. When there is no capital and institutional framework, it would be difficult for Nigerians in Diaspora to invest in the country,” he said.
The President, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu expressed regrets that there is no effective savings culture in Nigeria.
“The market is a place where you mobilise savings and it is this savings, which come from people who do not have immediate need of the money that you collect from and channel it to those that have immediate need and then, pay those people for using their fund. That is the whole essence of capital formation.
“But currently, we do not have an effective savings culture, the much we have is like a legislation where you must be part of a pension scheme and sometimes people talk about insurance and all that. Beyond this, there is no effective way of ensuring that this culture is growing within the populace because if you do not have this effective saving culture, it will be difficult for you to really mobilise fund,” he said.
The Managing Director of Chapel Hill Denham, Bolaji Balogun, explained that the market currently have the pension fund as the only significant savings pool, noting that due to the level of risk and caution attached to pension fund management, it becomes imperative that another big pool of capital is formed.
“If we do not create other pool of savings and investment within the next four to five years, the market would not record any significant growth. We need to build a deeper savings and investment from strong buy-side, which would lift capacity.”
An independent Investor, Amaechi Egbo, said Nigeria’s economy need to initiate policies and action programmes that would develop and grow the capital market by encouraging both the private and institutional investors to take greater initiative in participating in the capital market.
This, according to him would help increase productive activities and promote a more private sector driven economy.
He added: “Dependence on pension fund as the only significant savings pool in the
“For the nation’s capital market compete favorably in the global market, we need to source for other means of capital formation. These will go on to enlarge and develop the capital market, boost capital formation and increase the pace of economic growth.”
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