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Experts seek alternative investment instruments to deepen financial markets

Financial experts on Friday stressed the need for the development of alternative investible instruments that would deepen the financial markets beyond 2020.

They spoke at United Capital’s 2020 Outlook with the theme: Decade of Alternative Investments (A Paradigm shift), in Lagos.

Mr Peter Ashade, United Capital, Group Chief Executive Officer, said the country’s investment climate was a pointer for a birth of alternative investments beyond equities and fixed income securities.

Ashade said that the country’s macro-economic policy environment in the first quarter of 2019 showed that 2020 would be a different playing field, not just for the capital market operators, but for general investing public.

“With rates on Treasury Bills (TBs) at low single digit, the Nigerian equity market was the global worse performer in 2019,” he said.

Ashade said that the stock market had rallied at about 10 per cent this January, after dropping by over 14 per cent in 2019.

He said that in spite of the stock market rally, demand for fixed income securities, even at discount rate below inflation rate, was still high.

Ashade noted that the development called for fresh thinking, for creation of alternative investment instruments.

“Over the last few decades, developments in the Nigerian capital market have mirrored over micro economic trend.

“In the years between 2000 and 2009, real Gross Domestic Product (GDP) growth averaged 7.7 per cent driven by economic reforms in banking, telecommunications and pension industry”, he said.

Ashade explained that this resulted in market-wide mergers and acquisitions, Initial Public Offerings, private placements and equity market boom.

According to him, the last decade was not as positive, as average real GDP growth slumped to 3.7 per cent from 7.7 per cent in the previous decade.

Mr Bismarck Rewane, the Managing Director, Derivatives Company Ltd, said that the country’s economic growth was not in line with its population growth.

Rewane said that Nigeria failed to achieve some of its 2020 goals, noting that the key issue in the next decade was growth.

“As we go to the next decade, key issue is about growth, nothing else; all other things are relevant, necessary, but not sufficient.

“We have a growth problem, we have a poverty problem; poverty problem is also a regional problem, abject poverty is defined as people who consume less than 1.8 dollars a day,” he stated.

Rewane said that government should take drastic steps to address the country’s population problem.

He said that government should address the power issue as well as insecurity to boost investor confidence, noting that foreign investors would eye emerging markets in 2020.

The economist said that economic management was the major challenge of the country, and not revenue.

He said that restricting local investors from participating in Open Market Operation (OMO) by the Central Bank of Nigeria(CBN) was not a good economic decision.

Rewane said that whatever was good for international investors should be good for local investors.

Mr Eguarekhide Longe, Managing Director, AIICO Pension Managers Ltd, called on the government and regulators to ensure consistency in policies.

Longe said that inconsistency in policies was driving investors away from the country.

He said that government, regulators and private sector must be on the same page for economic growth and development.

Longe stated that private sector should be allowed to drive the economy instead of depending on borrowings.

“We need to be a little more ambitious, we should be coordinated, we should think of big ticket transactions to compete in Africa,” he said.

Mr Ken Etim, Managing Partner, Banwo & Ighodalo, called for effective regulation and adherence to the rule of law to boost investor confidence.

Etim stressed the need for engagement of regulators in investment laws in line with global trend.

 

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