Mounir Gwarzo, Director-General, The Nigeria Securities and Exchange Commission –SEC- during his introductory remarks said the Nigerian capital market on the other hand plays an important role in fostering capital formation and sustaining the economic growth of the country.
Gwarzo stated this while welcome the guest speakers and participants to the Seminar, the first of its kind being organized by the SEC, held on Thursday that brought together experts with impeccable professional, policy and academic background to deliberate extensively on the implications of the budget for the Nigerian Capital Market.
The SEC Seminar with the themed: “The 2017 Budget of Growth and Recovery: Relevance, Implications and Perspectives of the Nigerian Capital Market” held in SEC Lagos Office was overflow to Idejo street with participants standing through event hours with provisions of external speakers.
“The Federal Government has proposed a budget of N7.298Trillion for 2017with an estimated N4.94Trillion of aggregate revenue available to fund the budget. The fiscal plan will result in a deficit of N2.36Trillion for 2017 which is expected to be financed mainly by borrowing. It is the intention of the Federal Government to source about N1.067 Trillion of this deficit from external sources while N1.254 Trillion will be sourced by borrowing from the domestic market.
SEC DG noted that large budgets deficits could affect stock prices and undermine investor confidence. The primary concerns for investors, in regard to both the budget deficit and the public debt, are the two related issues of interest rates and inflation, he added.
Gwarzo pointed out that increasing levels of public debt and continuing federal deficits naturally lead to higher interest rates. The end result of continuing deficits and increasing debt is most likely a severe devaluation of the currency. Given that Exchange rates and stock prices are intrinsically linked, he added.
In his words: currency depreciation do affect share prices in either direction depending on whether firms are export oriented or import oriented adding that as the apex regulator of the capital market, it is essential that we consider the impact of the 2017 budget on the Nigerian capital market.
He also reiterated that even more important is the question, “How can the capital market contribute more meaningfully to the growth and recovery process which the 2017 budget seeks to promote?”
I’m sure you will agree that the relationship between the 2017 budget and its impact on the capital market deserves to be analyzed at a dedicated forum such as this, he said.
“You would observe that the 2017 budget maintained substantially higher allocations for infrastructural projects. It is expected that this seminar would facilitate discussions by stakeholders on the role of the capital market in addressing Nigeria’s infrastructure deficit financing. While commending the initiative by the Nigerians Sovereign Investment Authority and Guarantco in establishing a dedicated infrastructure credit enhancement facility, the question still remains; Are there new products, new initiatives or new strategies to be adopted? What policies need to be changed or put in place to ensure the infrastructure projects contemplated by the budget are effectively actualized?
“Agriculture also remains at the heart of the 2017 budget as a key head for diversifying the economy. The proposed allocation to the sector is at a historic high of N92 Billion. “Nigeria’s agricultural policy is expected to focus on the integrated development of the sector by supporting the development of commodity exchanges. Again, how can the capital market support the implementation of this policy?
“We also can’t talk about growth and recovery without the small and medium scale enterprises. What are the prospects for these entities within the 2017 budget? Again what is the role of the capital market in this regard? What kind of strategy could we design to support SME’s financing through the capital market given that SME serve as the important building block of our economy.
Gwarzo who did not hide his feeling said “It is worthy to stress the fact that the SEC as part of its developmental role created an enable environment in terms of regulatory framework to support financing of infrastructure through the capital market, Such Framework include rules on infrastructure funds, revenue bonds etc are all aimed at encouraging issuances to cater for such critical projects which could not be funded through the traditional budgetary means.”
“The critical issues now that the enabling environment has been created and even strengthen what can the market operators and other stake holders do to galvanize issuers including the Governments and their Agencies to leverage on the capital market platform for cheaper long term funds towards addressing these challenges.
The panels of discussants at the seminar are includes:
Dr. Ore Sofekun, Managing Director of INVESTMENT ONE Vencap,
John Chukwu, Initiator/Founder of Cowry Asset Management Limited,
Dr. Biodun Adedipe, Chief Consultant, B. Adedipe, Associates Limited,
Bayo Rotimi, CEO, Quest Advisory Services Limited
According to the statement, the objective of the seminar is show a clear picture of the relevance and implication of the 2017 budget for the capital market as well as a strategic plan on the role of the capital market in actualizing the 2017 budget.