Despite the current pessimism about the future of emerging markets, investors have been urged to keep hope alive on the future of Nigeria, Africa’s biggest economy.
“Don’t give up on growth opportunities for Nigeria -watch out for the opportunities”, said Razia Khan, managing director/ Chief Economist, Africa Global Research, Standard Chartered Bank, at the 2015 edition of Annual Capital Market Conference in Lagos, organised by BusinessDay.
The theme of the coneference was “Nigeria’s capital market as anchor for economic development”. The message remains that Nigeria and other African countries should find a way to reduce the volatility that goes with the boom and burst cycles in a capital market.
Currently, everyone who is looking at the global future likes to know what the near-term outlook for the markets looks like, but Khan insisted that there are no easy answers to such, noting that the expectations of what the US Fed has done or could do, is a major driver of capital flows in and out of emerging markets like Nigeria.
“Nigeria’s policy needs to be looked at holistically – listen to the private sector. It is not just about earning oil money and allocating it. Oil prices could come back and the shame of it is how Nigeria will spend it. This is a time when deep institutional reforms are required – look at the tax system”, Khan noted.
Mary Udok, director, investment management department, Securities and Exchange Commission (SEC) who represented Mounir Gwarzo, DG SEC, said the conference is a laudable initiative that shouldn’t have come at any other time than now. “The capital market plays an important role in facilitating economic growth”, she said.
“The stock market is like a nose that smells the directions of the economy. Year 2016 will be a lot better for the stock market, driven by ongoing reforms in recent years. We should be a little more patient. As far as the right things are been done in the country in terms of reforms, the market will move higher in reaction to these reforms”, said Victor Ogiemwonyi, chairman, Association of Issuing Houses of Nigeria (AIHN).
Ogiemwoyi noted that reforms come before any real growth.
Khan, in her presentation titled “How we see the world in 2016” noted that investors pessimism about emerging markets is overdone, insisting that Nigeria has what it takes in terms of long-term growth to allow the economy to recover.
Current energy prices and investors views have always been volatile, an indication that Nigeria must be more than oil.
Her words: “Markets signal a more difficult environment. In SSA, FX rates are under pressure and are helping drive inflation higher. For any growing economy, it is a rule of thumb that imports also grow.
“It is pretty good to begin to substitute imports by local productions. Import substitution will lesson the pressure on the whole economy. If Nigeria will run a wider deficit budget for the mean time, it will have to depend on internal sources of financing budget”.
She further said: “Though, Nigeria’s equities market is not giving anyone hope that growth turnaround is going to happen, we know that 2015 growth has been impacted by election time, but we expect reforms away from oil dependence to drive 2016 growth. 2016 is a pivotal year for economic reform”.
“Next year, we are going to see a resurgence of emerging markets currency -though that could take a while for businesses to realise. The fact that oil price has been a little bit cheaper has made a lot of emerging markets increase their consumption of oil. Once the market starts focusing on the demand and supply equation, there is going to be pretty higher price equation for oil”.
Panelist at the conference were unanimous in their submission that Nigeria currently faces tough times, as decline in oil price continues to affect the nation’s foreign reserves with continued pressure on the Forex (FX) market.
Bola Ajomale, CEO, NASD OTC plc said, “These are strange times for Nigeria. There is never a bad time to take stock of our market – look at what we are doing and what we have done.”
Tumi Sekoni, head business development, FMDQ OTC Securities Exchange, who represented Bola Onadele.Koko, MD/ CEO FMDQ OTC Securities Exchange, said “Nigeria can actually take advantage of the local potentials in the debt capital market. One of the things FMDQ is doing, is support for economic development. We are developing the corporate bond market – by building awareness, ensuring transparency and liquidity, which guarantees investors entry and exit.
Participants at the conference were asked not to over-estimate how much the US economy will keep growing.
“The key problem that the US Fed has is that oil prices have collapsed. By the end of next year, we see oil price rallying to $75 per barrel. The important thing about GDP size is not actually about the numbers but what the numbers represent”, Khan said.
Iheanyi Nwachukwu & Josephine Okojie
