Securities Dealers Need Intervention Fund, Chartered Institute Of Stockbrokers tells Central Bank Of Nigeria
The Chartered Institute of Stockbrokers has urged the Central Bank of Nigeria to create an intervention fund for securities dealing firms as part of effort to stabilise the equities market.
The CIS made the call during a webinar it held on Tuesday with the title ‘The Nigerian economic review for 2020 and outlook for 2021 with recommendations.’
The institute identified the major factors that would propel Nigeria’s economic growth despite the negative impacts of COVID-19 on businesses globally.
Presenting the CIS’s position paper, the Chairman, Research and Technical Committee, Mr Akeem Oyewale, explained that the economic outlook for 2021 was predicated on the timing and availability of vaccines to put COVID-19 under control.
He said the private sector activity needed to be significantly stimulated, while the micro, small and medium-scale business class should have greater access to viable long-term capital.
He said these would be effectively accomplished if the equity capital market was supported, strengthened and stabilised with continuous liquidity.
Oyewale said, “Based on the universally acknowledged principle that the money (short term) and capital (long term) markets complement each other in the economic development process, we wish to call on the Central Bank of Nigeria to extend the following structural/liquidity support to the equity arm of the Nigerian capital market:
“Creation of an intervention fund for securities dealing firms, to avail them the necessary liquidity to maintain consistent position on quoted securities, thus stabilising the market.”
He said banks’ stocks should be permitted to qualify for investment of margin lending facilities, under strict regulatory controls, because of their significant impact on market turnover.
“In view of the gradual return of local investors, we enjoin the Central Bank of Nigeria to be temperate in dealing with interest rate, liquidity and yield adjustments in its monetary policy,” Oyewale added.
According to him, historically, local pension funds served as the critical catalyst for stabilising and propelling growth in the advanced economies of the world.
He said, “We, therefore, urge the Pension Commission and Nigeria’s Pension Fund Administrators to significantly increase the percentage of pension funds invested in the Nigerian equity market.
“Investment of Nigerian pension funds in local equities remain less than 10 per cent of pension funds under management, but we strongly believe that, given the current needs and safety structures of the market, the 25 per cent statutory cap can be safely made a minimum figure for the PFAs.
Oyewale added, “The impressive equity index performance aside, the massive 446 per cent oversubscription of the FGN’s third Sukuk Bond, issued to construct and rehabilitate as many as 44 major roads across the country has further confirmed the strong absorptive capacity of the Nigerian capital market.”
Earlier in his welcome address, the President/Chairman of the Council, CIS, Mr. Olatunde Amolegbe, said the institute would carry out a thorough review of the Nigerian economy every year with a view to helping government, policymakers and industry regulators in the country craft effective strategies to accelerate GDP growth in the country.
– Punch