The federal government ought to unlock the huge long-term financing potential of the capital market and hyperlink loans to infrastructure bonds to realize constant annual development of 16 p.c over the following six years to realize a $1 trillion financial system by 2030.
There was the professional view on the 2023 Annual Convention of Capital Markets Journalists in Lagos final weekend.
A professor of finance and capital market, Uche Uwaleke, mentioned with the rising want for infrastructure funding and the nation's excessive public debt profile, mobilizing long-term financing via the capital market and deploying home market borrowings into infrastructure bonds are essential to attaining the purpose.
Talking on 'Harnessing the Capital Market in Financing the Nationwide Growth Plan', Uwaleke identified that regardless of the formulation of a improvement plan aimed toward addressing the nation's large infrastructure hole, Nigeria remains to be rated as one of many lowest in infrastructure to GDP amongst rising nations. economies.
He mentioned: “To slim the hole, the Authorities, via the formulation of the Nationwide Built-in Infrastructure Grasp Plan, has proposed an funding of $3 trillion in infrastructure over the following thirty years, amounting to an annual expenditure of $100 billion.
“This interprets into an annual funding of over N42 trillion, which is greater than the scale of your complete annual budgets of the federal and sub-national governments. Financing this huge infrastructure deficit poses an enormous problem for the federal government given Nigeria’s low revenue-to-GDP ratio of lower than 10 p.c, making the capital market route unavoidable.”
Uwaleke identified that the capital market is presently going through quite a few challenges, which proceed to hinder its full improvement regardless of the great progress revamped the previous twenty years. He famous that the extent to which the Nigerian capital market can facilitate financial improvement is a perform of its stage of improvement.
He listed a few of these challenges together with a weak home financial system, poor financial savings mobilization, small measurement relative to GDP and market focus.
Uwaleke famous that financial development in Nigeria has been weak, particularly in latest instances, partly because of the financial system's over-reliance on crude oil.
Though the unemployment fee has grown from 27.1 p.c within the second quarter of 2020 to 33.3 p.c within the fourth quarter of 2020, he mentioned the scenario is additional exacerbated by rising inflation, which ends up in unfavorable actual returns on investments within the capital market.
“Furthermore, the pursuit of low inflation and GDP development is hampered by an enormous infrastructure hole, regardless that the infrastructure inventory represents solely 35 p.c of GDP, far under that of comparable nations.
Uwaleke burdened the necessity to deal with the issue of rising meals costs, noting that this continues to drive stagflation, a scenario of excessive inflation with weak and tepid financial development.
He urged the federal government to focus extra on reviving the manufacturing sector and agriculture as key drivers of sustainable financial development.
