By Tony Obiechina
Nigeria’s first Professor of Capital Market Studies, Prof. Uche Uwaleke has warned that over exposing the Nigerian Capital Market to foreign portfolio investors ( hot money) and a handful of local investors, was a threat to the deepening of the capital market as well its role in the country’s economic development.
Uwaleke who is of the Nasarawa State University, Keffi, made the observation in Abuja on Thursday while welcoming stakeholders to the inaugural ‘Prof. Uche Uwaleke Colloquium on the Nigerian Capital Market, with the theme: “Fiscal and Monetary Policies for Deepening the Capital Market in Nigeria. “
According to him, the Market as currently composed is “tied to the apron string of foreign investors so much so that if they (foreign investors) sneeze, the market catches cold”
He appealed to the Central Bank of Nigeria ( CBN) to initiate policies to rescue the market from the stranglehold of the foreign investors as well as the few local investors by broadening the domestic component to protect the market from an impending shock and consequences should the foreign portfolio investors have a change of investment decision or in the case of any unforeseen eventualities happen to the few dominant local counterparts.
“The Nigertian Capital Market is challenged by depth and breadth, we need to diversify capital market. If the few dominant and big companies which are players in the market go under today, that will be the end of the capital market. The Market is tied to the apron string of foreign investors so much so that if foreign investors sneeze, the market catches cold. The CBN should come to the rescue of the capital market with sound policies to engender confidence and participation by a large spectrum of the domestic investors as this is the only game in town,” Uwaleke emphasized.
Contributing to the discussion, the Chairman of the colloquium and former Director General of the Securities and Exchange Commission (SEC), Dr. Suleiman Ndanusa and other panel discussants sought for enduring policies by the Government to engender the overall growth of the country which could then lead the inclusion of many locals to participate in the financial market in the country.
Speaking as Special Guest of honor at the colloquium, the Deputy Governor of the Central Bank of Nigeria ( CBN) in charge of Economic Policy, Dr. Joseph Nnanna while reacting to the concerns raised on the low level of participation by Nigerians explained that it was due to the economic situation in the country.
Nnanna who was represented by the CBN Director of Monetary policy Department, Mr Moses Tule said, said people do not invest where they live from hand to mouth. You can only save to invest when you have leftovers.”
Also commenting on the calls by the apex bank to relax its policy tightening, the Deputy Governor offered reasons why rates won’t be reduced now, “the reduction in the key interest rate—Monetary Policy Rate (MPR) at this time would throw up a cocktail of fiscal challenges in the economy and create more inflationary pressure.”
Speaking further, he said, “When you reduce MPR, of course, the way the fundamentals are today, you are going to have the impact of that in other ways; which means the demand is going to be higher on the government to increase wages because inflation will erode the living wage. There will be demand on the government, and every other person in the private sector will demand for wage increase.
“That’s the choice. We have to choose between having to improve infrastructure and interest rate will come down overtime and the whole economy will benefit or reduce interest rate now and then worsen inflation,” he added.
The Deputy Governor expressed satisfaction that there was now complimentarity between the monetary and fiscal policies, pointing out that one benifit is the acceding by the fiscal authorities to the clarion call on it by the monetary authority to create room for the private sector in the debt market by reducing the amount of local debt, a strategy which he said has helped to put the economy on a growth trajectory.