CBN Applauds FMDA Role in the nation’s financial market

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The CBN Governor said the FMDA Conference theme is not only apt, but timely, considering that financial markets constitute an important mechanism to mobilise domestic savings and channel same to productive investment which engenders capital accumulation, innovation and sustainable economic growth.

Godwin Emefiele, Governor of Central Bank of Nigeria (CBN) in his keynote address delivered at the 2018 Financial Markets Dealers Association (FMDA) Conference on the theme “The Nigerian Financial Market-A Catalyst for Sustainable Economic Growth” to operators and stakeholders in the nation’s financial market.

Emefiele who was represented by CBN Executive, Mrs. Olatoun Akinola of Financial Markets Department of CBN at the maiden FMDA Conference Edition, held in Lagos, September 21st, 2018 said the fundamental functions of financial markets that enhances economic performance remain constant over time and across countries and these includes: promoting borrowing and lending through the transfer of purchasing power between economic agents;  providing  price information for decision making by households and firms; spreading or sharing risk between investment promoters  and fund providers; dealing with incentive-related problems that negatively affect financial contracts such moral hazards, adverse selection and information asymmetries; enhancing efficiency through reduction in transaction and information costs; and providing holders of financial assets with liquidity in times of need through re-sell or  asset liquidation.

According to him the financial market is broadly delineated into money and capital markets. The money market facilitates the transfer of short-term funds and promotes the management of liquidity in the economy, he noted.

“The main segments of the country’s money market are the banking, treasury bills and the foreign exchange markets. The capital market is used to source long-term funds for long-term investments and the market consists of the treasury bonds market, corporate bonds market and the equity market.”

In his words: In Nigeria, financial market development has been driven by several reforms over the years in line with the revolution taking place in the finance landscape around the globe. We have progressed from an era of heavy regulation to the on-going era that is driven primarily by deregulation, liberalization and globalization, and advances in information and communication technology which has brought about significant changes in financial infrastructure.

He pointed out 5 ways forward in the light of the importance of an efficient financial market to an economy, it is imperative to ensure that every impediment to the proper functioning of the market is addressed:

Maintaining a stable macroeconomic climate at all times would make the market operate more efficiently and encourage participation by prospective investors. Taming inflation to its barest minimum and curtailing foreign exchange rate volatility among others are essential for macroeconomic stability that could create a conducive environment for investment.

There is also the need to expand the range of investable securities on the Exchange to deepen the market and provide opportunities for risk diversification by investors.

Similarly, there is need to create economic conditions that would encourage more stable longer-term capital flows in the market.

To ensure greater accountability and promote transparency, the Nigeria Sock Exchange should ensure the internal discipline and efficient supervisory and regulatory processes.

There is an urgent need to attract new listings and new investors in the market. There is significant untapped potential for raising capital for investment from the capital market as has been demonstrated in the past during the bank consolidation exercise.

 

The Caption Photo: Godwin Emefiele, Governor of Central Bank of Nigeria (CBN)


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