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CIS seeks overhauling of financial system to attract growth, development

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By Peter Egwuatu

CHARTERED Institute of Stockbrokers (CIS) has called for the overhauling of the nation’s financial system to attract more growth and development in the economy.

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Besides, the stockbrokers urged the federal government to set up a council, comprising different professional bodies to drive savings as a strategy to encourage investors towards medium and long term investment in Nigeria.

In a statement entitled “The Nigeria Economic Review: Outlook and Recommendations for 2020”, the Institute urged the federal government to review entire financial system for enhanced growth and development.

The statement said: “The federal government should review the structure of the entire Nigerian financial system significantly to raise the utilization and development of the capital market, especially, fixed income and equity segments to create a balanced and faster growth inclined system. There is a need to set up an independent Council comprising banks, stockbrokers, mortgage institutions, insurance companies, and Pension Fund Administrators, among others to more effectively coordinate the mobilization of savings in the country.

“Federal government should institutionalize the funding framework for Capital Market Literacy (CML) in Nigeria by financially empowering CML oriented bodies, as is done in France through the IEFP. The Tertiary Education Trust Fund (Tetfund) should allocate a portion of its fund to the capital market literacy drive, and to the CIS in particular. As banks control almost the entire liquidity in the Nigerian financial system, they should support capital market investments, including re-introduction of margin lending with improved regulations. CBN, being the dominant institution that currently provides liquidity support for critical economic sectors, should extend its liquidity support to the capital market, including the equity segment.

“The Federal government should direct Pension Funds in Nigeria to look beyond fixed income investments and also invest substantially in the equities market for liquidity and stability purposes. Greater tax incentives should be granted to companies and individuals in accordance with their levels of savings and investments in formal and recognized outlets such as stock markets.”

In the review, the Institute noted that the Money Market continued to dominate the Nigerian financial market space with the CBN’s interventions in various sectors of the economy.  It states that significant among these measures were the directive that deposit money banks should increase their Loan to Deposit Ratio (LDR) to 60%, and the restriction of patronage by local corporate and individual investors in Open Market Operations (OMO) auctions. “These contributed to the achievement of a stable foreign exchange rate and an increase in bank credit to the real sector, although Gross External Reserves dropped to $39.8 billion  in November” the statement said.

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In its review of the secondary market, it stated that “The Nigerian Stock Exchange recorded crucial milestones with the $5.07 billion listing by Introduction of MTN Nigeria and the $3.8 billion Ordinary Shares Initial Public Offering of Airtel Africa Plc in the review period. However, low liquidity continued to plague the stock market as the NSE’s All Share Index fell 14.6 percent to close the year at 26,842.07. Market Capitalization, however, closed on a slightly improved figure of N12.958 trillion. Analysis of The NSE’s historical data showed that between 2007 and 2018, domestic transactions on the NSE dropped by 66.68 percent, while foreign transactions increased by 97.88 percent.”

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