BY MICHAEL EBOH

Following planned reforms in the Nigerian economy and the capital market in particular, the authorities of the market have been cautioned against benchmarking the Nigerian economy and capital market with others in advanced countries.

Mr. Martin Oluba — Professor of Economics at UGSM-Monarch Business School and Managing Director/Chief Executive Officer, ValueFronteira Limited, who gave this warning in a paper titled: “Enhancing the net_benefits from our capital market reforms,” urged the authorities to ensure that the peculiarities of our contexts and our stage in the financial market evolution feature prominently in any model for the reform of the capital market.

From left: Executive Director South, Henry Ajagbawa, Oyo State Governor, Senator Abiola Ajimobi, MD/CEO of Oceanic Bank Int’l Plc, John Aboh during the visit to Oyo State Governor in Ibadan on Wednesday.

“The important point here therefore is that it will be inappropriate to blindly benchmark against the developed markets on criteria such as market liquidity since the underlying structural features may not necessarily permit such comparison,” he said.

Oluba lamented the lull in economic activities both in the money and capital markets, brought about by the reform activities carried out by the Central Bank of Nigeria (CBN) in the Nation’s financial sector couple of months ago.

Although the initiatives were bold and positive, he said that it nevertheless, triggered ultra-cautious reaction among investors and entrepreneurs, which in turn led to a nigh-freeze in economic activity and created pseudo stability in most economic prices.

Oluba called for closer coordination between the Securities and Exchange Commission (SEC) and the designers of monetary and fiscal policies to ensure that future adverse consequences on the market and the economy as a whole are substantially anticipated and controlled.

He emphasised the need for reforms that are proactive in nature, anticipating future shocks and ensuring that mechanisms are put in place to address such shocks before they have negative effects in the market.

He said, “Reform should have a purpose which advisably should be proactive. A lot of improvements to the structures and processes in our markets are fundamentally reactionary which implies that many injuries would have been sustained before it mattered to adjust the system against future adverse possibilities.

“Assume for instance that some of the reforms aimed at instilling market discipline were in place much earlier before the global economic crisis. Assume too that while the market flowed with the bullish euphoria of the market prior to the global economic crisis that the warnings of an imminent inevitable crisis were heeded and proactive counter measures put in place as a result.

“Purposefulness in the capital market can also be extended to a deliberate supportive development of the real sector following the footpaths of the Central Bank. Thus while the CBN has increased its developmental focus one should expect the SEC to follow suit as collaborators. The ultimate essence of the capital market is developmental via long-term financial intermediation routes.”

Speaking further, Oluba said, “It is important to point out that in as much as benchmarking is essential in designing appropriate reform programmes, the peculiarities of our contexts and our stage in the financial market evolution must feature prominently in any model for the reform of our capital market. One cap does not fit all. This is precisely why it is dangerous to allow ourselves to continuously fall victims of the template approach to solution search.”