Investors set agenda for finance minister
Capital market experts have called on the incoming Finance Minister and Coordinating Minister of the Economy, Wale Finance Minister and Coordinating Minister of the Economy, Wale Edun, to deal decisively with a multiplicity of challenges arising from high inflation, foreign exchange (FX) shortage, low output growth and balance of payment crisis to boost local production and attract investment to the market.
According to them, urgent attention is needed in streamlining ministries, departments and agencies’ (MDAs) activities, harmonising overlapping areas and inculcating their programmes into fiscal/ monetary policies to enhance fiscal discipline, prudent use of resources and prevent wasteful spending.
Specifically, the Chief Executive Officer of Wyoming Capital and Partners Tajudeen Olayinka, noted that through the creation of an enabling macroeconomic framework for businesses to flourish, fiscal authorities would contribute towards sustainable economic growth and the recovery of the capital market.
Recall that the increasing exposure to naira devaluation and dollar crisis has compelled foreign portfolio investors (FPI) to shun the Nigerian market despite the recent decision of the Central Bank of Nigeria (CBN) to unify the multiple FX rates.
According to the National Bureau of Statistics (NBS), headline inflation increased further by 129bps to 24.08 per cent y/y in July. The increase was primarily driven by the impact of elevated PMS prices induced by the PMS subsidy removal, lingering currency depreciation among others.
Also, capital flight triggered by legacy issues of FX liquidity and rising insecurity and uncertainty in the nation’s economy have continued to take a toll on foreign investment as participation in the first six months of 2023 closed at N145.08 billion.
Olayinka argued that there is need for the minister to engage and work with structural adjustment experts to help navigate the myriads of problems around the ongoing adjustment programme of President Bola Tinubu.
An independent investor, Amaechi Egbo, said the economy under the new minister needs to be restructured towards long-term productive activities where the capital market is most relevant.
According to him, this will begin with privatisation of government enterprises in the heavy industrial sector of the economy and setting the stage for massive private capital formation to grow the economy.
He pointed out that there is a need for the reversal of the current crowding out of the private sector from credit due to the persistent sale of FGN bonds and treasury bills through rigorous pursuance of policies of balanced budgeting by the fiscal authorities.
Additionally, Egbo stated that the dormancy of the primary market for equities indicates that confidence is yet to be restored. He added that if market fundamentals improve remarkably through the growth of corporate earnings, the profitability of investments can attract more investors to the market.
Vice President of High Cap Securities, David Adonri, noted that for the economy to grow sustainably and enable the capital market to play its crucial role, inflation and interest rates must be in the lower single digit.
He pointed out that the market must be representative of all sectors of the economy, noting that policies and programmes must be in place to reactivate the primary market where capital formation occurs.
According to him, the main reason why the capital market has been witnessing low patronage is attributable to the impact of both inflation and the uncomfortable high exchange rate regime.
He further explained that high-interest rate hits foreign portfolio investors as they face exchange rate risk with their investment, especially concerning repatriation of dividends or capital or both.
“The economy has been placed in the hands of the Coordinating Minister and Minister of Finance. He is expected to coordinate the activity of MDAs responsible for economic development and formulate their plans into fiscal policies with monetary policy support.
“First, he has to help the President to clean up the economic mess left behind by President Buhari. His agenda should include increasing public revenue, reducing borrowing, repayment of public debt and balancing the budget. He has to continue the current policy reforms aimed at making the economy market driven.
“He is expected to guide the President in the modification and implementation of the National Development Plan (NDP 2021 – 2025). He is also expected to leverage the capacity of the Capital Market to finance the fiscal economy (Production and Trade) by reviving the Primary Market. Finally, he is expected to help the President to build a self-reliant and import independent economy that will last,” he added.
Head Equity, Planet Capital, Dr Paul Uzum said harmonising monetary and fiscal policy, as well as tightening all fiscal leakages, would close up the opportunity for politicians and civil servants to embezzle public funds.
“All these should come before emphasis on tax reforms, as people will willingly pay taxes if they see prudence on the part of the government. Once the capital market sees these, investors’ confidence will improve and those selling equities and bonds to invest in dollar assets will stop.”
Also speaking, the President of New Dimension Shareholders Association of Nigeria, Patrick Ajudua, stressed the need for the government to tackle the issues of infrastructure, noting that this would enable industries to work at full capacity and generate employment.
Furthermore, he noted that all developed and emerging economies have used industry as the key driver of modernization, adding that industry creates the platform that attracts capital and technology.
According to him, if infrastructure development, which includes power, roads, rail among others is in place, many industries will be working to capacity, employ more workers and make more money which may encourage primary market fundraising.
“Much is expected from the incoming Minister of Finance, who is also an investment banker & former commissioner of finance. He needs to address the issue of infrastructure deficit, high cost of energy and port tariff, bureaucratic delay in clearing of goods as well as encourage more companies to list in the capital market.
“He needs to address economic issues that have resulted in most companies folding up, declaring losses and negatively impacting their profitability, exchange rate crisis, floating & devaluation of currency issues should be tackled.
“Also, the issue of multiple taxation that has impacted negatively on the growth of most companies in the capital market should be addressed. Government should rather give tax incentives to these firms as a means of attracting more investors into the market,” he said.
President of Independence Shareholders Association of Nigeria (ISAN), Moses Igbrude said he should revamp the economy and make it more business-friendly by addressing challenges of Forex and removing all bottlenecks associated with exports, as well as introducing incentives to attract issuers to the market.
“The minister should make the capital market a focus point by working with all market stakeholders to introduce incentives for listed companies such as tax incentives, encourage government and their agencies to patronise their products and services.
The minister should work with the stakeholders to develop a robust conflict resolution mechanism to address issues within the market promptly and ensure that regulatory bodies live up to expectations by being more responsive and decisive in their actions and activities,” he said
