The prevailing high interest rate on FGN bonds is discouraging investment in productive activities. This was the view of participants at a one-day seminar organised by the Securities and Exchange Commission (SEC) to deliberate on the implications of the 2017 budget to the capital market.
Biodun Adedipe, principal consultant, B.A & Associates, said that with interest rate of over 15 per cent on FGN bonds and treasury bills, which are risk free instrument, nobody will want to invest in productive activities with all the attendant risks. He argued that the use of high interest rate regime to grow the economy was not practicable as it stifles the growth of Small and Medium Enterprises, SMEs.
In a communique issued at the end of the seminar, the capital market operators emphasized the need for greater synergy between the monetary and fiscal policies and elimination of silos in policy formulations. They said that public private partnership should be exploited in infrastructure development, arguing that unless our infrastructure is first developed by local funds, no foreign investors would be willing to bring in their funds to develop the infrastructures.
The market operators identified the privatization of government owned firms as a key ingredient instrengthening the capital market and stimulating the country’s economic activities. They also called on the government to give specific timelines within which public assets that would be sold and the process through which they would be sold would be carried out. “The same should be done through the capital market. This would encourage efficiency and scarce resources used to manage these assets can be freed up and channeled to critical sectors of the economy,” the communique stated.