News Column

Okumagba - Rebased GDP Will Attract More Investments to Nigeria

May 1, 2014

Group Managing Director of BGL Group, Mr. Albert Okumagba, has been the Chairman, Planning Committee of the annual national workshop of the Chartered Institute of Stockbrokers (CIS) for the past three years. He spoke to journalists at the end of the 2014 edition of the workshop held in Abuja last week. Goddy Egene was there. Excerpts:

The Nigerian capital market has witnessed significant recovering in past two years. But what is your assessment of investor's confidence currently in the market?

There is no doubt that investors' confidence fell considerably during the financial crisis, evidenced by a virtual wiping out of the retail segment of the market. This explains, to a large extent why a handful of institutional investors, mostly foreign dominated the market for a long time. However, confidence has returned to the market as can be seen from the impressive performance of the market in recent years. The sweeping sanitisation of the financial services sector and the improved reporting standards and corporate governance has also helped in this regard. This is also evidenced in the increased participation of the domestic investors in the market as foreign portfolio investors reduce their holdings.

From your above analysis, what measure do you think can be adopted to further enhance investor confidence?

I believe that a lot of work is being done in this regard. As stated earlier, the improved transparency in terms of reporting and the stronger regulatory push for proper corporate governance is achieving good results. However, further measures to enhance confidence will be the active display of zero tolerance for market infractions by market operators. In addition, the regulators must ensure speedy delivery of settlement/judgement to investors in cases of disputes with capital market operators. I strongly believe that speedy implementation of decisions by regulators and government would also help boost confidence of investors. For example, the quick implementation of the removal of stamp duties and VAT payment on secondary market transactions could attract stronger interest in the market. Recently the Nigeria's gross domestic product (GDP) was rebased. In specific terms, what are the benefits of rebasing the GDP with reference to the Nigerian Capital market?

The rebased figures arguably represent an improvement in the accuracy of the Nigeria national income estimates, and offer the investing community, financial and academic analysts, professionals, and public planners with more accurate data for doing their work. Across social, economic, financial and trade metrics for the Nigerian economy, significant changes are now obvious. Being the largest economy in Africa would, without a doubt, put Nigeria on the world map as a force to reckon with going forward. Its $509.97billion in 2013 is larger than Egypt ($226.831 billion), Morocco ($95.981 billion) and South Africa ($384.31 billion). It is even larger than Malaysia's$305.32 billion. The per capita GDP estimates grew to $2,889.00 from $1,555.00 pre-rebasing, suggesting that an average Nigeria earns about $7.9 per day and of course a robust standard of living that could support large savings and consumption. It is believed that, considering the country's attractive demographic statistics, this development would generate more foreign investments in terms of both Foreign Direct Investment (FDI) and foreign portfolio Investment (FPI) for the economy and capital market respectively.

Talking about attracting foreign investors into our capital market, what do you thing should be put in place to attract foreign investors into our market?

As you may know, our financial market is already very attractive to the foreign investors considering the yield that the market offers. Although the equity market is currently experiencing a lull, our stocks are trading at very attractive valuation. However, the structural deficit in terms of lack of infrastructure and some policies to aid production/manufacturing, the country's risk profile appear to be high in attracting long term capital through direct investment. This also limits the ability to attract patient capital that can play in the capital market for a long time. While the government is doing a good job of improving infrastructure deficit in the country, there is need to increase the speed to meet up with investors' expectation within the shortest possible time.

Last week, the Chartered Institute of Stockbrokers (CIS) held its third national workshop in Abuja. As one of the major promoters of stockbrokers what informed the decision to organise the workshop?

The annual national workshop was borne out of the need to create platform for thought leadership on critical issues in the national economy as it concerns the capital market. It is also an engagement platform for members who are market players, and regulators and the policy makers- the government. It is part of the larger efforts to use the capital market as a catalyst for growth and of course development.

But how would you appraise the workshop in the last three years?

In the first place, it is important to note that the resolutions made at the various workshops in the past are subject to a lot of factors that are external to the institute. However, as a professional body in the Nigerian capital market, our conferences and workshops are premised on engagement with the other critical stakeholders especially the public sector and policy makers on major issues that affect primarily the business of the institute in particular the Nigerian economy in general. In this regard, resolutions of our conferences and workshops in the past are usually presented to the government and related stakeholders. In addition, several meeting are held with the relevant authorities to ensure that resolutions passed at the previous workshops are implemented. Notwithstanding, CIS has impacted the economy in a number of ways. It played major role in the passage of Asset Management Corporation of Nigeria (AMCON) Bill and the subsequent establishment of AMCON. Also the amended investment guidelines for Pension Fund Act by the PENCOM are part of the CIS's efforts.

The 2014 workshop was seen as unique. Why is it so and can you shed more light on this year's theme?

This year's workshop is unique in the sense that it focuses on trade, investment, power and agriculture sectors. The uniqueness of this year's workshop is premised on the pivotal role that these sectors would play in economic growth and development of any nation in the near future. Given the coincidence of this with the time when the economy's GDP rebasing exposed it as the largest in Africa in terms of size, no other time proves to be more pertinent to discuss these critical sectors' dynamics than now. In line with the theme of the workshop- "Update on the transformation agenda and expectation from the public and private sectors", the workshop focused on evaluating the progress of the transformation agenda in relation to opportunities and challenges thrown up in the process. It was also to critically provide workable roadmaps for the government on closing the identified gaps and resolving the challenges either through policies, legislations and/or partnership for the benefits of all stakeholders.

As one of the active capital market operators, what messages are your people sending to the government in order to uplift the market?

Thanks for this question. As a capital market operator, we are constantly working with the government through our regulators and our trade groups to uplift the market through lower transaction fees, increased transparency through stronger corporate governance, adoption of global standard market structures and improving access to liquidity for market operators. We have contributed immensely towards developing a capital market master plan, working with the Capital Market Committee of the Securities and Exchange Commission (SEC) and have severally engaged the Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo-Iweala on the role of the capital market in the country's economic development.


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Source: AllAfrica


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