Dr Suleyman Ndanusa, former Director-General, Securities and Exchange Commission (SEC), on Tuesday, said the nation’s capital market would not witness the expected growth unless the Federal Government embraced quantitative easing.
Ndanusa told newsmen in Lagos, while reviewing the performance of the capital market as the country marked its 59th Independence Anniversary.
‘Quantitative easing’ is a monetary policy adopted occasionally by the government to increase money supply in the economy to further increase lending by commercial banks and spending by consumers.
Ndanusa said the capital market would continue to drag as long as the issue of insecurity persisted and the economy continued to slow down unless government embraced quantitative easing.
“If you see what Ghana is trying to do about its economy, beyond creating an enabling environment like providing power and enhancing security, the government’s fiscal policies must be able to incentivise and make our market very competitive.
“The news that the Value Added Tax (VAT) and other taxes are either being increased or being reintroduced is not good at this point in time.
“These are times that there will be quantitative easing, the government must also come up with policies that will make our own environment competitive,” Ndanusa said.
He noted that portfolio investors moved to other climes instead of Nigeria because of unfavourable economic policies such as charging taxes on dividends and other capital market investments.
“I believe our fiscal policies must be geared towards incentivising and making our capital market a destination of choice.
“Investment in the real sector must be encouraged in a way that at least more existing investments and new investments will come into it and if that happens, that will boost the capital market.
“Existing businesses must be encouraged to come to the capital market to raise funds.
“And if you look at the primary market, issues have been very limited in the market, the reason being that investors are shy because the environment is still not at ease for people to bring out their money.
“The environment has been very bad for the market to thrive and unless the economy fully turns around and government comes up with policies that will discentivise investors, particularly in the area of fiscal policies, this will persist.
“Until government encourages both new and existing businesses to come into the market to grow their businesses requiring more funds, it will be difficult for the capital market to grow,” explained Ndanusa.
According to him, the capital market also requires good regulations, where rules and regulations are followed; noting that the market has to be accountable, fair and that there must be good governance.
“So, all these things which are definitely in deficit right now must be worked upon if we want our market to turn around because we are competing with other jurisdictions and then we must do something about them.
“Essentially, my point is that the market is not doing well now. It can only do well when the economy does well; it can only do well where there are policies that will encourage people to invest.
“It can only do well when the foreign investors see our environment as safe and profitable.
“It can only do well when our environment is seen to be safe not only for institutions, for the people but also for investment. People only take their money where they believe it is safe,” he stated.
According to him, when the environment and the economy are doing well, the market would also boom because the market determines the performance of the economy.
Ndanusa further said portfolio investors usually went to where their investments were safe and where they would get the highest returns.
He said the Nigerian capital market had not recovered since the 2008 financial crisis and recession of 2015 and 2016.
“If the economy is not doing well, investible funds locally are affected and also foreign investors will have to look for better environment for better returns and where their resources are safe,” Ndanusa said.