Nigeria: Capital Market can finance 2016 budget deficit – NSE boss

*Chief Executive Officer of the Nigerian Stock Exchange, NSE, Oscar Onyema.

*Chief Executive Officer of the Nigerian Stock Exchange, NSE, Oscar Onyema.

15 January 2016, Lagos — The Chief Executive Officer of the Nigerian Stock Exchange, NSE, Oscar Onyema, Thursday declared that the nation’s capital market has the capacity to fund the 2016 budget deficit.

Speaking during the presentation of the NSE 2015 recap and 2016 outlook in Lagos, Onyema said despite the current bearish trend, the market still has the capacity to finance the proposed budget deficit.

According to him, investors who had been on the sidelines due to some economic uncertainties are being expected to return as government policies become clearer.

Weak demand for stocks amidst sell pressure has depressed the equity market by over N1.2 trillion in the first eight days of 2016.
In spite of the bear run, Onyema said: “The capital market has an opportunity to effectively finance the FGN’s proposed budget deficit for 2016 and the implementation of its Medium Term Expenditure Framework (MTEF). With greater clarity on policy direction, we anticipate the return of investors who had remained on the sidelines throughout 2015.”

The return of the investors, he noted, would result from is predicated on effective implementation and communication of the government’s economic blueprint; credibility in monetary policy stance; relative stability in the macro economy (oil price stability above benchmark targets, increase in tax collection to Gross domestic product ratio among others); and improved security.

Onyema explained that while the market dipped by 17. 4 per cent and the primary equity market was flat in 2015, the bond market ‘s capitalisation grew by 32.7 per cent to N7.14 trillion in 2015.

He said federal and state governments raised N76.5 billion and N35.8 billion in debt capital in 2015, expressing optimism that the market can still provide high level of debt capital to governments in 2016.

According to him, apart from the federal government raising debt capital directly from the market, other government agencies could be unbundled and made to access the capital market for funds so as to free some cash for the government to fund other areas of development.

He said the Nigerian National Petroleum Corporation is already looking in that direction and urged others to consider the same option.
The Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, had last month said the Nigerian bond market has the capacity to provide funds that will be required to finance 2016 budget deficit.

Speaking against the delisting of the FGN bonds JP Morgan Bond Index, Nwankwo had said: “JP Morgan did into establish Nigerian bond market. They listed us because we have already developed the market.

JP Morgan looks for countries that qualify and put them on their list so that the can sell their own service. We developed the market by ourselves and the market is still there because the people who developed it are still here. We did not develop the market based on foreign participation, we developed it and it attracted foreign participation. For the avoidance of doubt, we encourage foreign participation in the bond market, but that does not mean we depend on foreign participation. Since JP Morgan announced the delisting the bond from its index, the Nigerian market has remained vibrant.

We have had many auctions and they have been successful because on the average, over 80 per cent of those invest in the domestic market is by Nigerians and not foreign investors.”

According to him, the Nigerian economy continues to be strong and attractive to investors because Nigeria is operating at near full unemployment of resources whether in agriculture, solid minerals, oil and gas, transportation, ICT. This country is still virgin and because it is virgin it is a great place for investors local and foreign.

“So I can assure you that whatever amount we reasonably decide to borrow from domestic and external sources, we are in a position to do that. And even if we have need to go to the international market to do a Euro bond, we will succeed,” Nwankwo said.
*Goddy Egene – Thisday

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