How to expand Nigeria’s debt capital market – Experts
• Urge govt to issue bonds for infrastructure project
Participants at the 2017 Nigerian Debt Capital Markets Conference and Awards, organised by the FMDQ OTC Securities Exchange in Lagos, at the weekend, have urged Federal Government-owned firms companies to issue bonds for infrastructure project in order to expand the nation’s debt capital market.
Besides, they also urged government to ensure that all interventions and assisted funding must be issued in bonds, note form, and subsequently listed on the Nigerian Stock Exchange (NSE), or FMDQ platform.
A debt issue is a fixed corporate or government obligation, such as a bond or debenture. A debt issue 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.
Indeed, the participants argued that if the nation’s debt capital market was expanded, there would be effective mobilisation, and allocation of financial resources to fast-track economic growth.They added that robust debt capital market would go a long way to boost the nation’s gross domestic product (GDP), and make it more competitive in the global market.
Furthermore, they suggested that regulators must fast-track the issuance process, build capacity, and raise the standard of issuers in the market.
Specifically, the Chief Executive Officer, Chapel Hill Denham, Bolaji Balogun, argued that government must be strategic to fast-track Nigeriaís economic growth, and stimulate activities in the market.He argued that there was the need to transform the market from primary commodity market to a robust debt capital market to develop the country and secure its future.
According to him, the country can witness a reasonable level of growth if government compelled firmsí receiving concessions or subsidies to float initial public offerings (IPOs) in the market within three years.
Government must privatise all major government-owned assets, and list them in the market to grow this economy in a sustainable manner. The economy had witnessed unprecedented drag over the years. Infrastructure in Nigeria needs to be financed largely in local currency because the U.S. dollar trail risk for Nigeria to price everything in dollar denominated currency is huge. The current impact in power on infrastructure owners, banks, government and the people is plain to see.î
The Partner, Templars Law, Zelda Akindele, said Nigeria would witness less volatilities associated with foreign exchange (forex) issues if the nationís debt capital market is considered a major option for project financing.If there is sufficient debt capital market, the forex issue would have been less painful. We need to tap into local sources financing to fund infrastructure and support investment in Nigeria.
There are large spaces for innovations, product offerings, and development, and these products must meet the needs of the market to accelerate growth.
The Managing Director and Chief Economist, Africa, Standard Chartered Bank, UK, Ms. Razia Khan, said Nigerian regulators must ensure increased collaboration with market players to enhance activities in the debt capital market.
There are regulations without full framework. Regulators must work hand in hand with the market players to improve transparent and disclosures in the market.The Managing Director, United Capital Plc, Mrs Oluwatoyin Sanni, had, in a recent interview with The Guardian, explained that Nigeria cannot expand its debt capital market without stable and lower interest rates and foreign exchange regime.
She said: “The Debt Capital Market will benefit from stable and lower interest rates on the shorter end of the curve. A stable foreign exchange regime must be created.“Economic policy stability and predictability, reduced activity by the Federal Government in the domestic debt capital market to avoid crowding out the corporate and sub-national segment.”
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