Capital Market Focus: Expert Urges Tinubu Govt for $1 Trillion Economy Goal

Professor Uche Uwaleke, a distinguished figure in Finance and Capital Markets, emphasized the imperative for the government to tap into the substantial potential of long-term financing within the capital market, specifically advocating for borrowings linked to infrastructure bonds. These remarks were made during the 2023 conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos over the weekend.

Uwaleke highlighted the urgency of this approach to sustain a steady 16% annual growth in the nation’s economy over the next six years, ultimately reaching the projected $1 trillion economy by 2030.

Addressing the audience on the theme “Leveraging Capital Market in Financing the National Development Plan,” Uwaleke acknowledged the persistent challenges faced by Nigeria, despite the formulation of a development plan aimed at addressing the substantial infrastructure deficit. Notably, Nigeria still lags behind in infrastructure-to-GDP ratio compared to other emerging economies.

To bridge this gap, the government proposed a substantial investment of $3 trillion in infrastructure over the next 30 years, requiring an annual commitment of $100 billion. This annual investment surpasses the combined budgets of both federal and sub-national governments.

Recognizing the formidable task of financing this immense infrastructure gap, Uwaleke asserted the inevitability of leveraging the capital market, given Nigeria’s low revenue-to-GDP ratio, which stands at less than 10%.

However, Uwaleke raised concerns about the challenges currently hampering the full development of Nigeria’s capital market, despite notable progress in the past two decades. Key issues include a weak domestic economy, inadequate savings mobilization, the market’s relatively small size compared to the GDP, and concentration challenges.

Highlighting the weakness in Nigeria’s economic growth, particularly due to overreliance on crude oil, Uwaleke pointed to rising unemployment rates, which increased from 27.1% in Q2 2020 to 33.3% in Q4 2020. Compounded by escalating inflation rates, there are negative real rates of return on capital market investments.

The pursuit of low inflation and GDP growth faces obstacles due to a substantial infrastructure gap, with only 35% of GDP represented by infrastructure stock, falling below the levels of peer countries.

Recent data from the National Bureau of Statistics indicated a surge in the inflation rate to 27.33% in October, compared to 26.72% in September. On a year-on-year basis, the headline inflation rate in October 2023 was 6.24 percentage points higher than in October 2022.

Major contributors to the inflation increase included food and non-alcoholic beverages, housing, water, electricity, gas, and other fuels, clothing, footwear, and transport, among others. Uwaleke emphasized the urgency of addressing rising food prices to mitigate stagflation, a situation characterized by high inflation alongside weak economic growth.

In conclusion, Uwaleke urged the government to prioritize the revival of the manufacturing sector and agriculture as pivotal drivers for sustainable economic growth.