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Liquid debt securities market, panacea to capital market dev’t, says SEC

The Securities and Exchange Commission (SEC) has said the development of a liquid government bonds market would have a positive effect on the economy, especially the capital market sector.

The Director-General, SEC, Lamido Yuguda, said this during the Annual Conference of the Capital Market Correspondents Association of Nigeria, themed: “Nigeria’s Public Debt and the Capital Market,” held over the weekend.

Yuguda explained that liquid government bond markets imply that there is a sufficient offering across a range of maturities, which in turn, is 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.”

…an increase in government expenditure funded by debt crowds out private investment, which in turn adversely affects aggregate expenditure and, consequently, economic growth with implications for the capital market.

Yuguda, represented by the Executive Commissioner, Operations at the SEC, Dayo Obisan, said 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 capitalisation following the establishment of a liquid debt securities market.

“At the same time, an increase in government expenditure funded by debt crowds out private investment, which in turn adversely affects aggregate expenditure and, consequently, economic growth with implications for the capital market.

“In addition, an underdeveloped capital market will affect institutional investors negatively, restraining the amount and maturity of funding available to the government locally,” he said.

Yuguda noted that as the apex regulator of the capital market, the SEC is committed to creating an enabling and facilitative oversight and regulatory framework supportive of the deepening and development of the Nigerian capital market.

He recalled that the Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed, launched and unveiled the revised Nigerian Capital Market Master Plan 2021-2025, adding that “The updated Master Plan underscores the Commission’s commitment to deepening and re-positioning the financial market as a key anchor of our economy.”

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