The Securities and Exchange Commission (SEC) has urged the Federal Government create a liquid debt securities market as this would result in a surge of private investments as well as quicken the dev
Its Director-General, Lamido Yuguda, stated this at the 2022 Annual Workshop of the Capital Market Correspondents Association of Nigeria (CAMCAN) which held in Lagos at the weekend.
Whilst commending the leadership of CAMCAN, Yuguda stated that the theme of the event tagged; “Nigeria’s Public Debt and the Capital Market” is timely and comes at a time Fitch Ratings downgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B-’ from ‘B’.
According to Fitch, the downgrade to ‘B-’ reflects continued deterioration in Nigeria’s government debt servicing costs and external liquidity, despite high international crude oil prices this year.
Yuguda who was represented by the Executive Commissioner, Operations at SEC, Dayo Obisan, said that while the relationship between public debt and economic growth has been well-researched, the relationship between equity market performance and public debt in Nigeria has been understudied.
“From the perspective of capital market development, the development of a liquid government bonds market would have a positive effect on an economy. This is because a liquid government bond market implies that there is sufficient offering of government bonds across a range of maturities, which is in turn-key to the construction of the benchmark yield curve (which is important for the establishment of the market-based risk-free interest rate used in equity pricing).
This synergistic relationship between the government bond and equity markets have been observed in several East Asian economies, which experienced a surge in private investment and equity market capitalization following the establishment of a liquid debt securities market”, he said.
Yuguda further added that the commission is committed to creating an enabling and facilitative oversight and regulatory framework supportive of the deepening and development of the Nigerian capital market.
“On our part as regulators, we shall continue to introduce new ideas and policies towards developing and regulating a capital market that is dynamic, fair, transparent and efficient, to contribute to the nation’s economic development. We will also continue to fulfil its mandate of protecting investors and creating an enabling environment for market operators”, the SEC DG said.