COVID-19: Capital Market, Key to Economic Recovery

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Augustine Arunah
With the downturn of the economies around the world, businesses are operating below capacity and, in some cases, downsizing and shutting down as funds are running out. The question now is, does the Nigerian capital market still have the capacity to revive the economy? Now more than ever is the time to show it.

A main idea behind the creation of a stock market was for capital and wealth mobilisation for corporate bodies, individuals or groups and societies. The Nigerian Capital Market has had its own ups and downs (more downs in recent years), reflecting the Nigerian economy at large and suffering from low patronage due to shortage of household savings from individuals, while corporate bodies chose the option of attracting foreign investors and foreign debts in recent years.

The capital market is an important part of the financial system that provides the mobilization of long-term funds from the private sector (Individuals, corporate bodies and mutual Funds) and the public sector too. Noting that the Nigerian Capital Market was setup for provision of a well-structured and regulated market place where promoters can source equity investment of long term nature needed for the financing of businesses, industrial sector and the economy at large.

The capital market plays a strong role in promoting economic development and corporate growth through an efficient and effective exchange of savings for securities, offering opportunity for government to finance projects aimed at providing essential amenities for socio-economic development, attracting foreign investments and stress free exit plans.

The benefits that could be derived from the capital market option of post Covid 19 recovery cuts across all levels of business and investment participants in the country. These benefits includes sourcing of long-term equity investment cash by the business community, thus attracting foreign capital through investments; providing the public and interested investors an organized platform to invest their savings in wide range of stocks and other instruments. On the economic side of the capital market, Nigerians can achieve economic growth through the promotion of capital formation, wealth mobilization and distribution.

Coming out of the Covid-19 pandemic, businesses and governments (Federal, States and municipals) will need operating funds, development funds, growth funds, and recovery funds (or whatever it will be termed) and they will preferably be long term funds. The capital market, through the Nigerian Stock Exchange, is the only institution in the country that has the capacity to adequately and sustainably handle Nigeria’s industrial and economic development needs post Covid-19 for the coming years.

This is the time that business promoters should be evaluating their entire business operational process and planning for restructuring, coming up with focused and realistic 10-year projections that would be attractive to both local and foreign investors. They should consider the engagement of a good and experienced financial and business adviser to guide and plan their growth process.

Capital Market Regulators need to look inwards to see where roles can be adjusted to attract and accommodate potential listings, while The Federal Government (Ministries and Agencies) needs to make adjustments to policies that would encourage such developments and growth within their industries and sectors.

The Nigerian capital market has the capacity for the provision of long-term capital for private and public sectors, which in turn can stimulate a sustainable economic growth and recovery, this is the road to be followed moving ahead. Leaving government to focus on governance and viable economic policies. N250 billion government advances can go a long way to solve a handful of business problems with very little impact on the economy. Anybody who doubts the ability of the Nigerian Capital Market should think back to 2005 – mid 2008 era.

Arunah, Business Development Adviser based in Lagos.