By PETER EGWUATU
THE consistent issuance of bonds by the Federal Government has been attributed to the slow pace of bond issuance by the private sector.
Group Managing Director/CEO, First Bank Nigeria Plc, Mr. Bisi Onasanya,, disclosed this at the 8th Annual PEARL Awards Public Lecture for Capital Market Development / Public Presentation of the book – "Winning Strategies of Nigeria's Corporate Giants" over the weekend in Lagos.
According to him, "There is a strong case to be made against the public sector's growing borrowing requirement. As the Federal Government has borrowed more it has seen an increase in the yield on its borrowing instruments. These rate rises, in turn, have increased the attraction of government debt instruments, pushed the private sector out of the business of issuing bonds, and diverted domestic savings away from the capital market to the money market."
Speaking on the topic: "Rejuvenating the Nigerian capital market for sustainable growth", he stressed that lack of confidence has been the major factor affecting the growth of the market since its crash in 2009.
To this extent, he said, "A large part of the downward pressure on the market's numbers has come from a fall in investor confidence. Under the then unregulated and unstructured margin lending regime, credit was freely available to anyone who cared to borrow to buy shares just as more investors, in particular, retail investors with little or no understanding of the risk of the market, especially Private Placements, were attracted into purchasing both registered and unregistered securities and got locked in as the bear market emerged.
Expectedly, to a not-too-financially-literate investor community which was unaccustomed to big and prolonged market slides, panic and fear drove confidence to evaporation points. It is therefore a very tough task getting the same hurting investors back to the beat without a firm promise (and perhaps guarantee) of juicy returns. But this is more for the retail end of the market.
"For the institutional investors, major confidence challenges still abound notwithstanding certain factors like the establishment of the Asset Management Corporation (AMCON), various regulatory actions and reforms which are aimed at improving financial disclosure, transparency and governance of financial institutions and listed companies and institutionalising effective regulatory oversight.
Not only do foreign institutional investors still entertain doubts as to the efficacy and reach of these initiatives, especially the weak judicial system that leaves most breaches unpunished, they also have very good reason to be concerned about the rising state of insecurity of lives and property in the country."
Onasanya, further noted that at the international level, the chronic global economic and financial crisis forced out most non-residential investors and has continued to prevent their return.
According to him, Along with falling investor confidence, some institutional and structural short-comings have also depressed market sentiments. Emerging evidence of widespread market abuses between 2006 and 2009 may have reinforced investors in the sense that they were the victim of scams perpetrated by market insiders before the collapse."
Vanguard Nigeria