Deepening debt capital market for economic for growth

For the Nigerian debt market to gain its enviable position of serving as platform to raise huge capital to cushion inflow of foreign funds to the market through patronage of Federal Government bonds, the corporate must play active role in bond market.

The prevalence of corporate entities raising money form the bond market, while government concentrates on establishing standards and infrastructures for the market to thrive, will usher in a new era in Nigeria’s Debt Capital Market (DCM) and the nation’s overall economy.

The Nigerian DCM has continued to generate increased interest within the corporate community and government circles, as rightly positioned with enabling infrastructure to mobilize funds for infrastructure development.

The Nigerian debt market has in recent years been enveloped by foreign capital delivered by foreign investors , which in spite of its soothing effect on the needs for developmental funds, it continues to further weaken or erase corporate bonds,

This and other issues were the major focus at the just concluded 2017 Nigerian Debt Capital Markets (DCM) Conference & Awards organized by the FMDQ OTC Securities Exchange, with the theme: “Positioning for growth.”

Vice President Yemi Osinbajo, in his address, charged stakeholders to support the Federal Government’s diversification efforts by embracing the DCM and the opportunities therein.

Osinbanjo lauded the FMDQ and its team, including, Chairman, Mr. Joseph Okwu Nnanna and Mr. Bola Onadele Koko, for putting in place, enabling infrastructures to facilitate debt capital market and aiding the government and corporates to raise developmental funds.

Represented by the Director General, Debt Management Office, and Mrs. Patience Oniha, the VP said that the partnership with the DCM will help to bring about the needed change expected in the debt instrument market.

Corroborating the VP’s stand, Minister of Finance, Mrs. Kemi Adeosun, recognised the opportunities inherent in the DCM; and assured all stakeholders that the Federal Government was taking bold steps towards putting the necessary reforms to support private sector-led growth, just as the country exits recession.

Meanwhile, the FMDQ Chairman. Mr. Joseph Okwu Nnanna, Chairman, FMDQ, represented by Mr. Jibril Aku, Vice Chairman, FMDQ said that the OTC Exchange would continue to provide requisite platform to power growth and foster deepening of the DCM.

Director General, Securities and Exchange Commission (SEC) Mr. Mounir Gwarzo, represented by Ms. Mary Uduk, Director, Investment Management, said:

““to develop Nigeria on a sustainable basis, reliance must be shifted from ‘owners’ capital’ and short-term funding from commercial banks to long-term capital from the DCM.”

International Finance Corporation (IFC), led by Mr. Jingdong Hua, vice President & Treasurer, Mr. Jingdong Hua, noted that for Africa to meet and maximise its potential in the global financial markets space, Nigeria must be one of its greatest engines.

He called on the government to create an enabling environment to support the DCM and also promote financial markets education for capacity building of market participants, and the general public.

Speakers and experts at the event were of the consensus that the country needs huge financial resources to tackle infrastructure needs of the country, which informed the consistent raising of bonds by the FG,

however pointed that caution be taken to stop weakening the DCM by crowding out corporate bond issuance and mobilization of local funds.

The meager state of the nation’s resources, makes it imperative for efficient mobilization of local funds, local developments,

but when foreign funds are mobilized, huge interest rates are repatriated by the investors, this increases more investments by the diaspora investors which continue to erase local funds mobilization from the market debt market.

The debt market, it emphasized, took into account, the poor economy; and has continued to develop infrastructure, creating the base for further development and diversification of the economy.

Chief Executive officer, Chapel Hill Denham, Mr. Bolaji Balogun, one of the discussants on the first panel session that x-rayed “Outlook for the Nigerian debt capital market,” said that the future of the DCM in the country remains bright,

but essential support needed to be given by the government through policy formulation and encouragement of corporate organizations to efficiently access the market, thereby depending the DCM.

While no foreign companies have in recent times raised bonds, more commercial papers have been issued and admitted by the OTC market,

though a step towards raising bond, investors would rather prefer FG bonds, or T-Bills, issued every month or regularly, against investing in corporates.

He however, pointed that corporate bonds should be encouraged, with less issuance of the FG’s bonds, which should be drive mobilization of local funds form the local market, against the prevailing stance on the market by Foreign Direct Investments (FDI), with emphasis on FG’s bond.

Balogun said that the country’s debt market is challenged by the persistent flow of the government’s debt issuance, which continues to guarantee high returns over equities; and further stagnating corporate bonds. “Foreign capital buys the sovereign and has failed to discipline the sovereign,” he said.”

According to him, the country must develop the base of other forms of savings, against emphasizing on foreign capital, which take flight for safety as soon as there is a challenge “ the foreign capital, as soon as there is problem, it is out of the door.” Balogun said.

Meanwhile, as the nation’s DCM positions for growth, safeguarding investing climate, growing employment opportunities and deepening the Nigerian debt capital market,

will lie on enhancing local currency mobilization from the market to finance local projects, hence over dependence on foreign investment in sovereign bond , would not only crowd out corporate bond , but negate all forms of development programmes.

Country Manager at International Finance Corporation (IFC) Eme Essien Lore, in her submission, emphasized that the future of the DCM lies on the ability to have strong market that would be capable of withstanding shocks.

Such accomplishment, Lore said, would be hinged on the ability of the market being able to raise huge local currencies to finance infrastructural developments, which is currently hampered by lack of enabling market infrastructures.

The IFC country manger noted that lack of infrastructure that would drive the market towards raising local currency to drive infrastructure development, “is why we don’t have the development needed in the debt capital market.

DCM has extraordinary role to play in mobilizing local currency; and we should move those initiatives forward.”

She said that the current state of the market has to do with structure of the economy, just as she pointed that a developed DCM would have greatly reduce the negative impact of the forex challenges which befall the economy in the time past,

adding that innovations, including on the structure of the economy would help meet market needs.

Her submission reemphasized the numerous benefits that would accrue to the nation’s economy via a depended capital market.