The Managing Director of Morgan Capital Investment Ltd., Chukwudi Nga, has called for a deeper and broader development of Nigeria’s capital market to effectively finance the country’s ambition of achieving a one-trillion-dollar economy by 2030.
The investment expert, Mr Nga, made the call as Nigeria marked its 66th independence anniversary, with just four years left to achieve its one-trillion-dollar economic ambition.
He said that although Nigeria had established the basic institutions, regulatory framework, infrastructure and products needed for a modern capital market, the market was still not deep enough to meet the financing needs of the economy.
According to him, the next phase of development requires more quality listings, stronger liquidity, a wider domestic investor base and greater mobilisation of long-term savings into productive investments.
We have built a capital market with the basic institutions, regulation, infrastructure and products required to play a major role in financing the next phase of our economic development,
“But the market is still not deep enough relative to the size and financing needs of the Nigerian economy,” he said.
Nga said the market had recorded significant developments, including the transition to a T+1 settlement cycle, which took effect on June 1.
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The Securities and Exchange Commission (SEC) said the transition was aimed at improving market efficiency, reducing counterparty exposure, enhancing liquidity and aligning the Nigerian market with international standards.
He also cited Nigeria’s return to FTSE Russell Frontier Market status in September as another positive development.
“These improvements in foreign exchange liquidity, capital repatriation and market accessibility have strengthened the market’s attractiveness to investors,” he said.
Nga said the developments were important for investor confidence but noted that the country needed to translate the reforms into greater mobilisation of long-term capital for businesses and infrastructure.
He said more companies should be encouraged to access the market through equities, corporate bonds and commercial papers, while infrastructure projects could make greater use of infrastructure bonds, Sukuk, project bonds and asset-backed securities.
“The capital market should increasingly serve as a major source of long-term financing for production, infrastructure and other productive sectors of the economy, rather than being seen mainly as a secondary market for trading existing securities,” he said.
The expert also identified pension funds, insurance companies, mutual funds and other institutional investors as critical to providing long-term capital to productive sectors.
He said government could support the process through appropriate tax incentives, faster approval processes, lower transaction costs and policies that encouraged institutional investors to commit more funds to long-term investments.
Nga cited the ongoing Initial Public Offering (IPO) of Dangote Petroleum Refinery and Petrochemicals, which involves 4.1 billion shares at N525 per share, valued at about N2.15 trillion.
According to him, transactions of such scale, alongside potential listings of major public and private enterprises, can broaden the market and increase opportunities for Nigerians to participate in the ownership and growth of major businesses.
He, however, said market capitalisation alone should not be used to measure the depth of the market.
Nga said a truly deep market required more quality listings across sectors, stronger liquidity, a wider retail and institutional investor base, a deeper corporate debt market, and greater capacity to channel long-term capital into productive investments.
He identified energy, telecommunications, technology, manufacturing, agriculture and infrastructure as sectors requiring stronger representation on the capital market.
On the current economic environment, Nga said the recent reduction in the Monetary Policy Rate (MPR) to 23 per cent could gradually influence investors’ portfolio allocation between fixed-income securities and equities.
He said lower interest rates could, over time, support equities by reducing borrowing costs for companies and making fixed-income instruments relatively less attractive.
He, however, advised investors to remain focused on company fundamentals, earnings, cash flow, corporate governance and valuation rather than investing solely on expectations of declining interest rates.
On attracting more Nigerians into the market, Nga said investment needed to become simpler, safer, more affordable and easier to understand.
He called for stronger financial education, saying many Nigerians still viewed the stock market as an avenue for wealthy people or short-term speculation.