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Capital Market Operators Apprehensive Over High Yields on FGN Bonds

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  • Capital Market Operators Apprehensive Over High Yields on FGN Bonds

Stakeholders in the Nigerian capital market have criticised the high interest rate on FGN bonds saying it discourages investment in productive activities. They spoke at a one day seminar organised by the Securities and Exchange Commission, SEC, to deliberate on the implications of the 2017 budget to the capital market.

They also called on the federal government to make concerted effort to address inconsistencies in the foreign exchange regime as it adversely affects private sector operations.

The seminar featured a presentation on “2017 Budget of Growth and Recovery: Relevance, Implications and Perspectives of the Nigerian Capital Market” by Mr. Afolabi Olowookere, Head, Economic Research & Policy Management and a panel discussion with Johnson Chukwu, Managing Director/CEO, Cowry Assets Limited, Mrs Ore Sofekun, Managing Director/CEO, Investment One Vencap Limited, Mr. Bodun Adebipe, Chief Consultant, B. Adebipe Associates Limited and Bayo Rotimi, CEO, Quest Advisory Services Limited as panelists.

According to Johnson Chukwu and Biodun Adedipe, with interest rate of over 15 per cent on FGN bonds and treasury bills, which are risk free instrument, nobody will want to invest in productive activities with all the attendant risks. They argued that the use of high interest rate regime to grow the economy was not practicable as it stifles the growth of Small and Medium Enterprises, SMEs.

In a communique issued at the end of the seminar, the operators emphasized the need for greater synergy between the monetary and fiscal policies and elimination of silos in policy formulations.

They said that public private partnership should be exploited in infrastructure development, arguing that unless our infrastructure is first developed by local funds, no foreign investors would be willing to bring in their funds to develop the infrastructures.

On how to stimulate growth in the capital market, they said that privatization of government owned firms is key to stimulating economic activities, while calling on the government to specify specific timelines to identify assets that would be sold and the process through which they would be sold. “The same should be done through the capital market. This would encourage efficiency and scarce resources used to manage these assets can be freed up and channeled to critical sectors of the economy,” they said.

Exploiting private partnership

“Government should exploit private partnership in developing infrastructure. There should be proper and lingering framework to ensure that every party to this partnership are held accountable to their part in this agreement. “Foreign exchange regime inconsistencies need to be sorted out as this impacts private sector adversely.

The conflict between monetary and fiscal policies needs to be resolved; there is need for greater degree of synergy and elimination of silos in policy formulation.

“The Boards of SEC and other critical agencies in the financial sector should be reconstituted. The delay in their reconstitution is sending wrong signals to prospective investors” they noted.

There is need for better coordination between the regulatory agencies in the financial sector – the Central Bank of Nigeria, the Pension Commission, PenCom, NAICOm and others,” they added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Nigeria’s Crude Oil Production Falls for Second Consecutive Month, OPEC Reports

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Crude Oil

Nigeria’s crude oil production declined for the second consecutive month in March, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

Data obtained from OPEC’s Monthly Oil Market Report for April 2024 reveals that Nigeria’s crude oil production depreciated from 1.322 million barrels per day (mbpd) in February to 1.231 mbpd in March.

This decline underscores the challenges faced by Africa’s largest oil-producing nation in maintaining consistent output levels.

Despite efforts to stabilize production, Nigeria has struggled to curb the impact of oil theft and pipeline vandalism, which continue to plague the industry.

The theft and sabotage of oil infrastructure have resulted in significant disruptions, contributing to the decline in crude oil production observed in recent months.

The Nigerian National Petroleum Company Limited (NNPCL) recently disclosed alarming statistics regarding oil theft incidents in the country.

According to reports, the NNPCL recorded 155 oil theft incidents within a single week, these incidents included illegal pipeline connections, refinery operations, vessel infractions, and oil spills, among others.

The persistent menace of oil theft poses a considerable threat to Nigeria’s economy and its position as a key player in the global oil market.

The illicit activities not only lead to revenue losses for the government but also disrupt the operations of oil companies and undermine investor confidence in the sector.

In response to the escalating problem, the Nigerian government has intensified efforts to combat oil theft and vandalism.

However, addressing these challenges requires a multi-faceted approach, including enhanced security measures, regulatory reforms, and community engagement initiatives.

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Crude Oil

Oil Prices Edge Higher Amidst Fear of Middle East Conflict

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Crude Oil

Amidst growing apprehensions of a potential conflict in the Middle East, oil prices have inched higher as investors anticipate a strike from Iran.

The specter of a showdown between Iran or its proxies and Israel has sent tremors across the oil market as traders brace for possible supply disruptions in the region.

Brent crude oil climbed above the $90 price level following a 1.1% gain on Wednesday while West Texas Intermediate (WTI) hovered near $86.

The anticipation of a strike, believed to be imminent by the United States and its allies, has cast a shadow over market sentiment. Such an escalation would follow Iran’s recent threat to retaliate against Israel for an attack on a diplomatic compound in Syria.

The trajectory of oil prices this year has been heavily influenced by geopolitical tensions and supply dynamics. Geopolitical unrest, coupled with ongoing OPEC+ supply cuts, has propelled oil prices nearly 18% higher since the beginning of the year.

However, this upward momentum is tempered by concerns such as swelling US crude stockpiles, now at their highest since July, and the impact of a hot US inflation print on Federal Reserve rate-cut expectations.

Despite the bullish sentiment prevailing among many of the world’s top traders and Wall Street banks, with some envisioning a return to $100 for the global benchmark, caution lingers.

Macquarie Group has cautioned that Brent could enter a bear market in the second half of the year if geopolitical events fail to materialize into actual supply disruptions.

“The current geopolitical environment continues to provide support to oil prices,” remarked Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, he added, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”

The rhetoric from Iran’s Supreme Leader, Ayatollah Ali Khamenei, reaffirming a vow to retaliate against Israel, has only heightened tensions in the region.

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Commodities

Geopolitical Uncertainty Drives Gold Prices Higher Despite Fed Rate Cut Concerns

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As tensions simmer in the Middle East and concerns loom over Federal Reserve policy, gold continues its upward trajectory, defying expectations and reinforcing its status as the ultimate safe-haven asset.

The latest surge in gold prices comes amidst escalating geopolitical tensions in the Middle East.

Reports suggest that the United States and its allies are bracing for potential missile or drone strikes by Iran or its proxies on military and government targets in Israel. Such a significant escalation in the six-month-old conflict has sent shockwaves through financial markets, prompting investors to seek refuge in gold.

Despite initial setbacks earlier in the week, gold resumed its blistering rally, buoyed by the specter of geopolitical uncertainty.

On Wednesday, the precious metal witnessed its most significant decline in almost a month following a hotter-than-expected US inflation readout.

This unexpected data led traders to recalibrate their expectations for Federal Reserve interest rate cuts this year, causing the yield on 10-year Treasuries to surge above 4.5%.

However, gold’s resilience in the face of shifting market dynamics remains remarkable. Even as concerns mount over the Fed’s rate-cutting trajectory, the allure of gold as a safe-haven asset persists.

Prices hover just shy of a record high reached earlier in the week, propelled by robust buying from central banks.

Market analysts interviewed by Bloomberg anticipate further gains in gold prices, citing continued geopolitical tensions and strong momentum in the market.

The precious metal’s near-20% rally since mid-February underscores its enduring appeal as a hedge against uncertainty and inflationary pressures.

At 9:54 a.m. in Singapore, spot gold rose 0.3% to $2,341.58 an ounce, signaling continued investor confidence in the metal’s resilience.

The Bloomberg Dollar Spot Index, meanwhile, remained relatively unchanged near its highest level since November.

Silver, often considered a bellwether for precious metals, held steady after reaching a three-year high, while platinum and palladium also registered gains.

As the world navigates through a complex web of geopolitical tensions and economic uncertainties, gold remains a beacon of stability in an increasingly volatile landscape.

Its ability to weather market fluctuations and maintain its allure as a safe-haven asset reaffirms its timeless appeal to investors seeking refuge amidst uncertainty.

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