Stock Exchange has capacity to finance 2016 budget

The Nigerian Stock Exchange (NSE) Thursday pushed aside the cascading profile of its equities to announce the preparedness of the bourse to finance the nation’s 2016 N2.2 trillion budget deficit.

The Chief Executive Officer of NSE, Oscar Onyema disclosed this while addressing journalists at the exchange’s 2015 market recap and outlook for 2016 in Lagos.

Onyema also assured that the market has the capacity to play its role in the implementation of the nation’s Medium-Term Expenditure Framework (MTEF).

President Muhammadu Buhari had last month, while presenting the 2016 budget before the National Assembly, explained that he was expecting a budget deficit of N2.2 trillion 2016, which would be funded through local and foreign loans.

He presented a budget expenditure of N6.08 trillion, with about N1.8 trillion voted for capital expenditure and N2.35 trillion for recurrent spending.

The NSE boss explained that the exchange had engaged government at all levels, from the Debt Management Office (DMO) to the highest authority on the need to finance the budget deficit through the market, even as government was yet to decide on the portion of the deficit to be financed locally and internationally.

Onyema, who anticipated that 2016 would be a challenging year for the capital market and the domestic economy, also noted that the stock market has lost over $30 billion in market capitalisation since the fall in oil price between June 2014.

He listed other contributory factors to the plummeting fortunes of equities in the market to include the pangs of volatile foreign exchange and other macro -economic concerns.

“The year 2015 proved to be uneasy for the global economy, which is expected to have grown at 3.1 per cent compared to 3.4 per cent in 2014. We believe that the three biggest contributors to the global slowdown were normalisation of monetary policy by the U.S. Federal Reserve; slump in commodity prices; and slowdown in China.”

According to him, the exchange would continue with its collaborative efforts with the new administration and other private sector players to create a framework for financing the nation’s infrastructure and capital requirements.

He said the NSE was poised to working with the Federal Government to ensure that the appropriate message is conveyed to the investor community to boost confidence in the market.

He however, noted that the current state of the market creates both challenges and opportunities for investors, adding that taking a portfolio approach to investing currently provides the best risk adjusted alternative for participating in the market.

He stressed the exchange’s commitment towards ensuring that it provides various classes of products that would enable investors create well diversified portfolio of uncorrelated asset classes.

He also expressed optimism that with greater clarity on policy direction, the investors who had exited the market would return in a near future.

“We believe that taking a portfolio approach to investing provides the best risk adjusted alternative for participating in the capital market,” he added.