Savings for Capital Formation, Investment Good for Economy—Ahmed – Business Post Nigeria

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By Dipo Olowookere
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said the mobilisation of domestic savings for capital formation and investment remains a critical success factor for harnessing the true growth potential of the Nigerian economy.
Speaking during the submission of a report of the Working Group on National Savings Scheme in Abuja on Tuesday, Mrs Ahmed said this would also deepen the capital market.
According to her, the recently launched Medium-Term National Development Plan 2021-2025 recognizes the role of a deep financial market in supporting the high and sustainable growth the plan aims to attain, expressing hopes that the proposals made in the report will guide the government in taking actionable steps to actualize the objectives outlined.
The Minister promised to review the report and work with the Securities and Exchange Commission (SEC) and other stakeholders to ensure that the country fully realizes the potential benefits of the scheme to the country.
“We understand that this initiative will involve several other agencies such as the CBN, FIRS, NAICOM and other important stakeholders. We will leverage on our collaborative working environment within the government to ensure we get necessary buy-in and commitment from relevant stakeholders.
“On behalf of the federal government and the Ministry of Finance, Budget and National Planning, I extend my sincere appreciation for your selflessness in giving your time and skill in this painstaking work in support of the government.
“I trust that we will count on your patriotic spirit when we call on you for further support in this or other laudable endeavours for our dear country,” Mrs Ahmed said.
Earlier, the Director-General of SEC, Mr Lamido Yuguda, stated that the need to establish a National Savings Strategy was outlined in the 10-years Capital Market Master Plan “as one of the key strategies to enhance capital formation by mobilizing domestic funds for investment to drive rapid economic growth.”
“It envisaged the deliberate provision of risk capital as venture capital and private equity that are naira based and more committed to the long-term prosperity of Nigeria as well as create a buffer to the instability created by foreign investors.
“The CAMMIC commissioned a white paper on a National Savings Strategy and recommended to the Minister of Finance, Budget and National Planning the formation of a working group to explore the feasibility of the report findings,” he added.
Mr Yuguda thanked the Minister for graciously embracing this initiative and constituting the team, expressing optimism that she will accept the recommendations of the group and facilitate the adoption of the National Savings Scheme in the nation’s development program.
“We are indeed grateful for your commitment and efforts to position our market where it deserves to be – a capital market that will broaden access to economic prosperity by enabling the emergence of financially responsible citizens, accelerate wealth creation and wealth distribution, provide capital to small and medium scale enterprises, and catalyse housing finance,” he added.
While presenting the report, Dr Ore Sofekun, a member of the committee and CEO of Foothold Advisors Limited, on behalf of the Committee Chairman, Mr Fola Adeola, said the scheme will be open-ended and considering its medium-term to long-term objective, participants will have the opportunity to decide how their contributions will be invested and will be able to make periodic re-allocations.
To allow for product diversification and provide savers flexibility and choice, she stated that multiple investor risk/return profiles have been designed with corresponding savings products.
These products will allow service providers to offer an array of diversified product options tailored to match customer needs.
On the implementation roadmap, Ms Sofekun said the scheme will be subject to the overall supervision of SEC and structured, to start, as a department within the agency.
She added that with the Investment and Securities Act (ISA) of 2007 currently being reviewed, a new section should be introduced in the proposed Investments and Securities Bill (ISB) to provide for the establishment of the National Savings Scheme as a mandatory scheme and other related matters.
“The new provisions in the ISB should be articulated to give the NSS its own advisory board. The governance structure of the scheme should be robust and transparent with stringent measures in place to ring-fence the assets of the scheme.
“The implementation mechanism is designed to consider practical realities and minimize complexity. The main objective is to create a stable and optimal financial intermediation structure where channels and savings products are easily accessible, and an effective and robust institutional framework is established.
“The overriding goal is to incentivize the population to save, have access to various savings-investment products and ultimately, provide a pool of funds to finance capital investments. The initial take-off expenses should be borne primarily by the Ministry of Finance, Budget and National Planning with some funding provided by the SEC,” she added.
The SEC launched a 10-year Capital Market Masterplan in 2015. The commission at that time believed that having just emerged from a bubble that negatively impacted the performance and confidence in the Nigerian capital market, it was expedient to come up with a market-wide strategic blueprint that had the buy-in of all stakeholders aimed at making our market deeper, vibrant and more effective.
The implementation of the initiatives in the 10-year master plan will transform the Nigerian market, facilitate the diversification of our economy, encourage savings and create wealth.
This will no doubt grow investor confidence, improve the depth and breadth of the market in terms of product offerings, engender market integrity, and contribute to the country’s economic growth.
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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng
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By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries and allies (OPEC+) is now producing below its targets by a record 3.58 million barrels per day – about 3.5 per cent of global demand, highlighting underlying tight supply in the oil market.
Data showed that shortfall in August, which stood at more than OPEC’s number 3 producer, the output of the United Arab Emirates (UAE), was a record and 24 per cent higher than July’s 2.89 million barrels per day.
The 10 OPEC members bound by the pact saw their collective crude oil production hit 1.399 million barrels per day below the quota, while the non-OPEC producers in the deal were more than 2 million barrels per day behind quota, at 2.185 million barrels per day. In July, OPEC+ was already 2.9 million barrels per day below its target.
Two main factors have been derailing OPEC+’s ability to hit its production targets: a chronic problem with underinvestment among certain members such as Nigeria and Angola, and, more recently, the impact of Western sanctions on Russian output.
Underinvestment in the Nigerian oil industry and the perennial problem of oil theft from pipelines have plagued the sector in recent years. Oil majors are not investing in Nigerian supply, and many foreign firms have either sold assets or signalled pursuing divestments in Nigeria’s oil industry.
Things worsened when production plunged to 972,000 barrels per day in August 2022, the lowest ever in 32 years.
This is as Angola and Libya overtook Nigeria by producing higher volumes of crude during the review month.
OPEC+ was widely expected to continue to underperform by a lot compared to its production targets for July and August after the group decided to accelerate the rollback of the cuts and have them completely unwound by the end of August.
The underperformance in September will be even higher because the group lifted its collective target by 100,000 barrels per day for the month of September. This increase will be reversed in October, OPEC+ decided at a meeting earlier this month.
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By Aduragbemi Omiyale
The Nigerian Exchange (NGX) Limited has promised to collaborate with market stakeholders to enhance securities lending transactions and provide an efficient and liquid market for investors.
The Divisional Head of Capital Markets at the NGX, Mr Jude Chiemeka, while speaking at the 2022 NGX Securities Lending Forum on Tuesday, said this is consistent with the commitment of the bourse to contribute to the growth and development of capital market in Nigeria and Africa.
He said securities lending presents significant benefits to investors in a bull or bear market – either as lenders or borrowers, noting that securities lending transactions have become an important element of capital markets all over the globe.
Mr Chiemeka added that in today’s capital markets, securities seldom lie unutilised, noting that if not being bought and sold in outright market transactions, securities are frequently lent to parties wanting to borrow them, or used as collateral to raise short-term finance.
Quoting a 2021 report done by International Securities Lending Association (ISLA), Mr Chiemeka said the total value of securities made available globally by institutional investors within lending programmes stood at $34 trillion with about $2.9 trillion on-loan globally across all asset classes; 48 per cent government bonds, 39 per cent equities, 6 per cent, corporate debt securities, 4 per cent, ETFs 3 per cent, other fixed income in December 2021.
He also noted that the global securities lending industry generated $9.28 billion in revenue for lenders in 2021, according to DataLend – a 21.2 per cent increase from 2020, adding that this shows the huge potential available in securities lending transactions.
“Domestically, the NGX, in response to the need for market expansion and development, introduced many products – securities lending being one of them – to give investors (retail and institutional) a wide array of asset classes to choose from. Since the Securities Lending and Borrowing (SLB) services was officially launched in the Nigerian market in December 2015, uptake has steadily risen, though not as robust as envisaged.
“According to a report by the exchange, in 2020, the market recorded impressive transactions, with about 7.4 million units worth N95.2 million traded. In 2021, while the volume in traded equities fell to about 6.8 million units the value grew to N513 million”, he said.
The Divisional Head explained that from the lender’s point of view, the benefits of securities lending include the ability to earn additional income through the fee charged to the borrower to borrow the security while adding that from the borrower’s point of view, it allows them to take positions like short selling. It also gives investors more options to take different views on the market.
“It is vital in the development of the capital market by providing liquidity, which in turn reduces the cost of trading and promotes price discovery.
“The exchange no doubt remains keen to provide an efficient and liquid market for investors and businesses in Africa, to save and access capital and investments.
“We promise to continue our collaboration with all market stakeholders, to collectively contribute towards the enhancement of securities lending transactions, and ultimately towards the growth and development of capital market in Nigeria and Africa at large,” he said.
On his part, the Managing Director of Stanbic IBTC Nominee Limited, Mr Majiyagbe Babatunde, while giving a historical breakdown on how securities lending has evolved said the securities lending market which started over 40 years ago has grown, generating about $9.28 billion (N4.2 trillion) in revenue for lenders in 2021 and went up by 21.20 per cent from 2020 globally.
“With Nigeria reporting N600 million in trade value and N5bn assets pledged by lenders, only a few trades have been done in the securities lending universe. Given the size of the capitalization of the equities market and how mature we have now become, the market needs to do more.
“There also needs to be liquidity of the Securities Lending market. Unfortunately, there has been so much reliance on the period when the market goes long without proper planning for when the market goes short.
“Securities lending will create value for both situations so that even when the market goes short, you borrow and sell off and buy back when the securities have become low. In the end, there are equal benefits for all players in the market with the Securities Lending market,” he added.
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By Aduragbemi Omiyale
The total debt profile of Nigeria increased by 2.98 per cent on a quarter-on-quarter basis to N42.84 trillion in June 2022 from N41.60 trillion in March 2022.
A statement issued by the Debt Management Office (DMO) disclosed that the total public debt stock of N42.84 trillion comprises the funds borrowed by the federal government, the 36 state governments and the Federal Capital Territory (FCT).
In Dollar terms, the money owed by Nigeria stood at $103.31 billion as at June 30, 2022, in contrast to $100.07 billion as at March 31, 2022.
These debts were incurred by the country from different sources, including from the domestic capital market and the international capital market.
A breakdown showed that the country’s total external debt stock in the second quarter of this year was $40.06 billion (N16.61 trillion) compared with the $39.96 billion in the first quarter of 2022.
The stats office said over 58 per cent of the external debt stock are concessional and semi-concessional loans from multilateral lenders such as the World Bank, International Monetary Fund, Afrexim and African Development Bank (AfDB) and bilateral lenders including Germany, China, Japan, India and France.
It was further disclosed that the total domestic debt stock as at June 30, 2022, was N26.23 trillion ($63.24 billion) due to new borrowings by the national government to part-finance the deficit in the 2022 Appropriation (Repeal and Enactment) Act, as well as new borrowings by state governments and the FCT.
The DMO disclosed that the total public debt to the gross domestic product (GDP) as at June 30, 2022, was 23.06 per cent compared to the ratio of 23.27 per cent as at March 30, 2022.
The agency emphasised that the debt to GDP ratio remains within Nigeria’s self-imposed limit of 40 per cent.
It further disclosed that while the FGN continues to implement revenue-generating initiatives in the non-oil sector and block leakages in the oil sector, the debt service-to-revenue ratio remains high.
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