Forex speculators are hurting the economy — ASHON Chairman
In this interview, the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON) and a Fellow of Chartered Institute of Stockbrokers (CIS), Mr Sam Onukwue, spoke on a range of issues that need to be addressed to boost activities in the Nigerian capital market, including how the government can strengthen the value of the Naira.
Why do you think the issue of leveraging the capital market to fund infrastructure by the government has continued to be a focal point of discussion in the financial market ?
The capital market remains one of the best sources of medium and long term finance for the government to bridge infrastructure gap in Nigeria. We at ASHON have always canvased that government at all tiers should take advantage of the market to float fixed income securities to fund infrastructure projects. The continuous oversubscription of SUKUK Bonds signifies investors’ appetite for safety of their capital in a recessionary period. The capital market has absorptive capacity to fund most of the infrastructure and this will reduce the government’s dependent on borrowing.
ASHON has just held its Annual General Meeting (AGM), can you provide an insight ?
It was a very successful Annual General Meeting. The Governing Council, through my Statement, informed our Members, the series of ASHON’s engagements with some critical stakeholders as part of our market development functions. The Council and Management, were commended on the prudent management of resources, especially, the downward trend in the budget for transportation, despite the hike in the pump price of petroleum and allied products. We shall continue to collaborate with other stakeholders to build investor confidence in the market.
What is uppermost in your mind with the current state of economy in Nigeria?
The Federal Government should address the macroeconomic vagaries such as exchange rate volatility and rising inflation rate. These amongst others have continued to affect business decisions. We have limited sources of foreign exchange. The Federal Government has announced its plan to boost the supply side. The implementation should be accorded utmost urgency. The concern is the source of the demand pressure for forex. Is it from genuine business people and organisations or speculators? Speculators are hurting the economy by buying Dollar to keep as a store of value for speculative purposes. Government can reverse the ugly trend by addressing the supply side. If there is stability in the exchange rate, it will have multiplier effects on other economic activities and boost the value of the Naira. ASHON has at several times urged the federal government to tap into an array of investment in the commodities space to generate employment opportunities, boost export trade and grow the Gross Domestic Products (GDP). Solid mineral is a cash cow. Government should direct its searchlight to the sector to take control of the revenue and protect the revenue from going into private pockets.
What is the nexus between the Capital Market and the economy?
At the basic level, the capital market, especially the stock market, is the barometer that gauges the economy. Its array of statistics show the direction of an economy. This is why it is often said that there is a linear relationship between the development of a capital market and the economy. The capital market provides a platform for the government to mobilise long term funds to finance infrastructure. Companies utilise the market to raise funds for a series of projects while retail and institutional investors need the market for capital formation and other benefits. Studies have shown that there is correlation between the development of an economy and its capital market.
What should be the pre-occupation of ASHON in the rapidly changing dynamics in the market?
ASHON has always been at the forefront of ensuring that its members operate professionally while the Association collaborates with the capital market regulators, operators and other stakeholders in the ecosystem. Our members played pivotal roles during banks’ recapitalisation and demutualisation of The Exchange among others.
How would you respond to the new short term measures that the Committee on Tax Reform has announced to make Nigeria a tax-friendly environment ?
The Tax Reform Committee, chaired by Mr Taiwo Oyedele has come up with some laudable quick wins to address the nagging issues of taxation, militating against investments in Nigeria. The fact is that while official taxes in Nigeria are 60, people contend with over 200 different types of taxes. The Committee’s recommendations will go a long way in restoring some level of sanity into taxation in Nigeria and that will enhance the government’s revenue drive from the sector without inflicting pains on the majority of Nigerians. We are all awaiting the implementation. ASHON had at different fora canvassed the need to take a second look at Capital gain Tax (CGT) to reduce transaction cost and attract all cadres of investors into the capital market. This is consistent with the need for the government to implement market-friendly policies to encourage more companies to seek quotation on the securities markets. A conducive tax environment will make our market more competitive .
Would you encourage investors to take a position in the market at the moment?
Regardless of the state of uncertainties in the global financial markets, investors that take sound investment advice have opportunities for superior return on investment on a consistent basis. Many investors often lose huge amounts of money by relying on their own intuition or consulting unqualified investment advisers. Investment in any asset class requires a lot of variables, including an investor’s investment objective, risk tolerance, sources of funds and time horizon, amongst others. Investment is a trade-off of risk and return, whereby an investor aspires to post the highest return at the lowest risk. This is achievable if proper analysis is done by certified investment advisers. Our members shall continue to engage investors on the need to work closely with stockbrokers for timely investment advice.
What is your advice to investors on risk management?
There is no asset without a risk element. The government bond is classified as risk-free, yet, it cannot be insulated from inflation risk, exchange rate risk and a host of others. What we are saying is that risk can be mitigated to ensure superior returns. In every risky situation, there are opportunities. The same applies to investment. It is all about understanding and deploying appropriate investment strategies. It’s not a game of one-size-fits-all. Contacting a professional investment adviser is in itself a risk-aversion measure. Investment professionals profile their clients as a precondition for advice on the appropriate investment opportunities.
How would you describe the relationship between the government and the stockbrokers?
We are partners in progress but the government can do a lot more by taking inputs from Stockbrokers whenever policy issues on the financial market are initiated. We expect a more cordial relationship with the appointment of two of our members at the heart of the economy- The Minister of Finance and Co-ordinating Minister of the Economy and Mr Yemi Cardoso, the new Central Bank (CBN) Governor. Stockbrokers play major roles in the capital market and they are the most visible operators. Every stockbroker is certified by the Chartered Institute of Stockbrokers (CIS) while at the corporate level, we have ASHON of which I am the Chairman. ASHON is a registered Trade Group by the Securities and Exchange Commission (SEC). Market development is at the core of ASHON’s and CIS’ activities.
Each group provides blueprints to the government annually on how it can utilise the market to grow the economy. The challenge is the failure of the government to utilise our inputs. Worse still, the Federal Government does not take inputs from the market operators on any capital market policy whereas the operators are the bridge between the Government and investors. This is one area that we believe that the new administration would make a difference in order to rejuvenate the economy.
