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President Tinubu’s advisory council recommends guidelines to strengthen Nigeria’s capital market

  • The Policy Advisory Council of President Bola Tinubu has recommended the need to accelerate the implementation of the Nigerian Capital Market Master Plan.
  • They also recommended the need to address macroeconomic pressures and operating challenges impacting market performance and liquidity.
  • Also, they’ve advised the government to issue long-term high-yielding debt securities, and increase participation of pension funds and insurance companies, amongst others.

The policy advisory council of President Bola Tinubu has asked the federal government to accelerate the Implementation of the Nigerian Capital Market Master Plan to strengthen the capital market and mobilize capital for development

 In a document, titled ‘Policy Advisory Council Report: National Economy Sub-committee’, the council highlighted key reforms that the government can implement to strengthen the capital.

Macroeconomic pressures

The council said that macroeconomic pressures and operating environment challenges have negatively impacted the performance of the market resulting in poor liquidity in the capital market.

It advised the government to Issue long-term, high-yielding debt securities (such as Special Purpose Bonds) for dedicated/ specific projects/ initiatives such as Agriculture, Industrial related initiatives.

The council urged the government to facilitate increased participation of pension funds and insurance companies in the capital market and collaborate with fintech companies to introduce new capital markets products such as multi-issue structured products, and special financial bonds to facilitate the interest of SMEs.

It also suggested that the government incentivize the issuance of, and participation in Environmental, Social, and Governance compliant products.

The council advised the government to issue SUKUK bonds as a strategy to raise capital for government projects and collaborate with the SEC to make the Certificates tradable on the stock market.

  • “Set up of a national commodity exchange with regional trading centres. Review the Non-Banking Financial Company Regulation (NBFC) to unlock credit to key segments of the private sector including mortgages, agriculture, etc.
  • Facilitate the creation of investment products in collaboration with Fund Managers to attract the Diaspora and retail investment in local securities.
  • Strengthen and enforce the regulation to protect the shareholders and investors, strengthen corporate governance and ethics, and punish market malpractices to deter improved compliance,” the council noted. 

The Advisory Council noted that the resolution and harmonization of multiple foreign exchange rates will encourage capital importation and increase investor confidence.

Monetary environment

On initiatives to create a monetary environment that drives growth, the council welcomes the readiness of the administration to address the issue of multiple exchange rates and the gap between the official and parallel markets in the President’s Inaugural Speech.

It advised the government to review the CBN balance sheet and ascertain the true position of Nigeria’s external reserves.

The council also urged the government to model the potential impact of a harmonized exchange rate regime on the economy and quantify the amount of foreign reserves required to adequately support the policy, based on the backlog of unmet FX demand and associated obligations; estimate of future FX demand for the year; and an additional contingency reserve.

It called on the government to aggressively grow FX supply & build external reserves, including securing funding support from the Multilateral Agencies and DFIs at concessionary rates.

  • “An estimate of at least $50-$60 billion in reserves, with a monthly inflow of at least $6bn-8bn$/month from export earnings and other forms of capital inflow, will be required to defend the Naira at an exchange of N500-N600/$. 
  • Remove all FX intermediation windows and allow the banks as primary dealers to supply the FX market through a willing buyer/willing seller model,” they said.

 

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