Emmanuel Ugwu, Umuahia
As Nigeria continues to grapple with the problem of Boko Haram insurgency, the federal government has been urged to adopt stringent measures to resolve the security issues, which have adversely affected the economy.
A financial expert, Professor Godwin Chigozie Okpara made the call during the 22nd inaugural lecture he delivered at the Abia State University, Uturu (ABSU). He observed that “insurgency distorts the flow of the economy” hence the urgent need to tackle it.
In the lecture entitled: “Speculative Financial Bubbles, Volatility and the Nigerian Economy”, Okpara insisted that there was no way the Nigerian economy could attract investments in a situation where insecurity pervades the land. This, he said was because insurgency has the capacity to wreak havoc on the national economy, which depends so much on inflow from oil revenue.
“Government should take urgent steps to address the issue of social unrest and insecurity that is devastating the national economy thereby acting as disincentive to local and foreign investors and consequently obviating the course of economic growth,” he said.
The professor of finance, who is also the Dean Faculty of Business Administration, ABSU, said that the Nigerian economy was being buffeted by “financial bubbles”, a situation where assets are traded at a price range that strongly deviates from the corresponding intrinsic value of the assets.
According to him, “Volatility of prices and returns in financial markets can be an impediment to attracting investments in a developing economy”, hence, the need to checkmate the financial bubbles from bursting and causing havoc on the economy.
To avoid a situation where the national economy is left at the mercy of financial bubbles which could burst with catastrophic consequences, Okpara said that a team of financial researchers/experts should be assembled “for diagnostic assessment and detection of signals of financial instability in the country.”
“This time to time diagnostic assessment will detect the bubbles and provide timely measures to avoid the growth and bursting of the bubbles,” he said.
The professor of finance advocated for efficient capital market where “all information is speedily incorporated in the prices”, adding that the absence of market efficiency causes high volatility persistence and could lead to financial bubbles”.
Furthermore, he said that the Nigerian Stock Exchange (NSE) should “palliate its regulations as it concerns information management rules such as publication of accounts, notices of annual general meetings, going to press, among others without prior written approval of the exchange.
“Such requirements impose restrictions on market competition,” he said, adding, “Regulations should promote governance but should not compromise on market competition”, he stressed.
He called for fundamental rethinking on macroeconomic, monetary and financial sector regulatory policies, pointing out that a bubble crash makes it imperative for such economic measures to be taken.
He added: “These policies must be such that will prompt actions to plug regulatory loopholes and leakages associated with the period before the bursting of asset bubbles,” the financial expert said, adding that the regulatory policies should be geared towards closing the gaps and eliminating overlaps in regulatory framework.”
On the impact of globalisation on the local economy, Okpara said that macroeconomic policies on the stock market were likely to be influenced not only by domestic regulations but also by globalisation and international integration of capital markets.
He stated that the national economy needed to be “prevented from catching cold when the global economy sneezes.”
Okpara therefore advised that financial authorities and government should be conscious of the effects of globalisation and synthesise macroeconomic policies that would withstand the adverse effects of globalisation.