2018 Budget: SEC Predicts Gains For Capital Market

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By OLUSHOLA BELLO, Lagos

The Securities and Exchange Commission (SEC) has reacted to the 2018 budget estimate presented to the National Assembly by President Muhammadu Buhari in Abuja Tuesday, noting that its implementation would boost the capital market.

The apex capital market regulator said it was determined to ensure that the budget played its role in enhancing the performance of the market in order to achieve the overall objective of the budget.

Speaking at the Commission’s 2018  budget seminar held in Lagos on Friday, the director-general of SEC, Mr. Mounir Gwarzo  said that the implementation of the budget would determine its impact on the economy, adding that the capital market was ready to leverage on such impact.

Gwarzo noted that the budget has effect on the fortunes of the equities market because of the effects of the exchange rate and other variables which, in turn, impact the larger economy.

“The Commission’s budget seminar series, which was establish this year, is established for evaluating the connection between the Nigerian capital market and the annual federal government budget with the major aim of identifying how the capital market can contribute and in turn benefit from the budget and its implementation”, Gwarzo said.

He noted that the federal government’s current debt strategy, which is to restructure its borrowings  towards external debt against domestic debt, would boost capital market activities as equities leverage on the both foreign and domestic inflow window.

According to Gwarzo, the balance of the deficit in the budget will also be financed from the proceeds of privatisation of some of the non-oil assets by the Bureau of Public Enterprise (BPE), which he said provides an opportunity for the growth of the capital market.

“All these will affect the debt capital market, the equities market and ability of companies to raise funds.

“In financing the 2018 budget deficit, we believe the debt segment of capital market will have some immediate benefit; the capital market will also play a very important role in the privatisation of those enterprises the budget has highlighted.”

For the 2018 budget, the chief executive officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane said expenditure growth was zero, pointing out that there were no stimulants for growth.

“It is not an expansionary budget; we are not spending our way to growth,” he said.

He said the issue of multiple exchange rates in the economy was not addressed in the budget, noting that the prevalence of such rates would continue to distort the market.

He added, “Inflationary projection in the budget is not realistic. Government is silent on subsidy on power and petroleum products, and minimum wage. The projection for non-oil revenue is not realistic and the deficit gap may widen after all.”

In his contribution, a professor of Economics at the University of Lagos, Ifeanyi Nwokoma described the 2018 budget as a very ambitious one.

He said, “Oil production is also ambitious. We are being too optimistic without a clear plan of how to achieve our target. Over the years, we have distorted the budget cycle. This will affect implementation and good accounting. Nigeria should have a clear budget cycle and budgetary interference should be avoided.”