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FG Should Use Capital Market To Fix Infrastructural deficits

FG Should Use Capital Market To Fix Infrastructural deficits

by magna / Wednesday, 21 January 2015 / Published in Capital Market News

Capital market operators have advised the federal government to use the market to finance the huge infrastructural deficit which has become the bane of Nigeria’s economic development.

The operators stated this at a joint press conference organised by the Chartered Institute of Stockbrokers (CIS), Association of Stockbroking Houses of Nigeria (ASHON) and Association of Issuing Houses of Nigeria (AIHN) in Lagos, adding that the effective and efficient utilisation of capital market facilities would enable the federal government to finance the 2015 budget despite its frightening infrastructural deficit.

The CIS was represented by its president, Mr Albert Okumagba, ASHON by its president, Mr Emeka Madubuike while AIHN was represented by its chairman, Mr Victor Ogiemwonyi.

They noted that interest rate is a veritable tool in national development, adding that in addition to aiding economic development as a whole, it also sends signals with regard to the expected dynamics of the capital market.

“A high interest rate discourages long term investment and lowers demand generally, whereas a low interest rate regime stimulates demand and helps with capital formation for long term investment. An example of the importance of the interest rate as a tool can be seen in its deployment by the United States (US) Federal Reserve Bank (FED) and United Kingdom (UK)’s Bank of England (BoE) to stimulate demand for commodities, the capital market and economy as a whole. The two countries brought interest rate to close to zero so as to encourage borrowing for consumption and investment purposes. The result of the exercise is a strong growth in the US and the UK.”

“From the foregoing, it is clear that the current nominal anchor for interest rate in Nigerian, the Monetary Policy Rate (MPR), currently at 13 per cent, is not only discouraging demand but is also a disincentive to investment in this environment, especially when inflation rate, currently 8.0 per cent has been successfully kept at below 10 per cent in the last two years,” they stated.

 

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