Expert seeks new economic model for debt reduction

By Helen Oji

 FDIs

 … Blames Nigeria’s GDP contraction on oil shock
• As NSE unveils plans to list shares of NGX Group

For Nigeria to attract the Foreign Direct Investment (FDI) needed to reduce public debt and shore up its

debt to revenue ratio in a sustainable manner, the need to adopt a new economic model with more focus on accelerating diversification of the non-oil sector of the economy has been stressed.

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At the Nigerian Stock Exchange’s 2020 Market Recap/2021 outlook the Managing Director, Chief Economist Africa and Middle East, Global Research, Standard Chartered Bank, Razia Khan, urged Nigeria to adopt measures that would absorb exposure to oil price shocks, if it must record any meaningful economic growth.
   
She noted that oil-dependence exposed Nigeria to the vagaries associated with oil price volatility, which has increasingly stretched the nation’s debt profile.
   
Khan argued that structural measures and policy response are needed to curtail persistent contraction in the nation’s gross domestic product (GDP) and stem the current inflation surge.

She said:  “Nigeria’s recovery in 2021 is hinged on fiscal policy and monitoring, centered on nonoil products. There must be a meaningful change in oil dependency in Nigeria. Nigeria must have diversification in place and be more resilient to oil impact.

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‘’There have been several oil-related shocks in quick succession, Nigeria’s growth has declined due to what is happening in the oil market. The diversification must happen very quickly.”
   
The Standard Chartered Bank boss also stressed the need for the government to leverage the Nigeria capital market to allocate investment to the productive economy, noting that there is currently a massive surge in portfolio investment.
   
Meanwhile, the Chief Executive Officer, The Nigerian Stock Exchange, Oscar Onyema, said plans are underway for the listing of ordinary shares of the Nigerian Exchange Group (NGX Group Plc), and its emergent subsidiaries for public trading at the stock market.
 
The NGX Group Plc was created as the parent company for the NSE and its operating structures with three operating subsidiaries – Nigerian Exchange Limited (NGX), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulatory arm; and NGX Real Estate Limited (NGX RELCO), the real estate company.

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He disclosed that the Exchange is looking forward to launching its first derivative product in 2021 after the NG Clearing Limited received approval in principle from the Securities and Exchange Commission (SEC), to launch clearing and settlement of exchange-traded derivatives products as Nigeria’s premier Central Counter Party (CCP) house.

According to him, the listing of the shares is expected to be the first order business once the exchange gets approval of the ongoing demutualisation (conversion).
 
He added that the listing would be by introduction ­– a process that allows the scheme shares from the demutualisation of the Exchange to be listed for public trading without initial public offering (IPO), noting that the timeline of activities will run smoothly with the receipt of all major regulatory approvals.
 
“On the availability of NSE shares, you would recall that at a recent AGM, we got approval from members to list the NGX Group Plc shares on the NSE. So that would be the first order of business once we get the approval and we will do a listing by introduction.

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“This is because the initial steps are that the members as part of the demutualization rules of the SEC, have to begin to sell down over a 5-year period and so that is the first opportunity for the general public to buy into the exchange when we are listed.

“The next opportunity is a potential IPO that will then make the shares of the exchange group more widely held. The exchange intends to use all market norms and legal means to make sure that these shares are widely accessible to the investing public. As regards profitability, we have worked on a 4-year strategy, and we have a strong plan as to how we intend to do and we will be engaging with the market,” Onyema said.
 
Subsequently, he said the NSE has fast-tracked engagement with stakeholders and is looking forward to launching its first derivative product in 2021.
 
“We look forward to consolidating on the benefits of demutualisation in the coming year, and we intend to aggressively pursue cutting edge products and services, access to new markets, and deliver better value to our valued stakeholders,” he said.