‘FG’s Proposed Fundraising in Capital Market for Varsities Unviable’

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  • ‘FG’s Proposed Fundraising in Capital Market for Varsities Unviable’

The Head of Department of Banking and Finance, University of Lagos, Prof. Rufus Olowe, has said the plan by the Federal Government to raise funds for universities through the capital market is not viable.

President Muhammadu Buhari, who was represented by Vice-President, Prof. Yemi Osinbajo, at the convocation of the University of Ibadan, stated that university education was really being under-funded and that the Academic Staff Union of Universities had a point for its ongoing strike.

He revealed that some of the options that the Federal Government was working on “are the details of education funding for the public universities, which will involve raising funds from the capital market to give a push to the infrastructure in our universities.”

According to Olowe, the planned fundraising will not be viable because the repayment will be tied to the internal revenue of the government and the pressure on government revenue is already very high.

He said, “The government has in the past raised so many bonds and there is a heavy commitment on the part of the government because it has too much debt. Adding another one for the universities will further increase the already heavy debt portfolio of the government.”

He added that another reason he described the project as unviable was that “the capital market is commercial, and universities are not run fully on a commercial basis.”

The Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, said he did not think the repayment would be a problem.

He said the challenge the government had been having was high recurrent expenditure, which could be controlled.

Ebo described the proposed fundraising as a wise decision, saying it was targeted at a specific sector.

He stated that it would have a long-term effect on the economy in terms of building quality human capital as well as deepening the capital market, adding that it would be a win-win situation for both the government and the capital market.

Ebo said, “Government should adopt more of these targeted borrowings as it can easily be traced and the effectiveness can easily be measured.

“We have always been saying borrowing is not bad on its own, but where it is directed to. The educational sector needs a serious intervention, and if the proceeds can be channelled effectively, we will see the effect in terms of improving the quality of the output of our educational system.”

He noted that the fundraising would be successful as long as returns were guaranteed because “there exists a huge appetite for debt in the Nigerian capital market.”

“This is what we have all been clamouring for; it will create more products for the capital market, in addition to the Sukuk and infrastructure bonds, among others,” Ebo added.

The Vice-President, Association of Stockbroking Houses of Nigeria, Mr Akinsola Akeredolu-Ale, said, “It is a welcome development for the long-term planning and continuity in the funding process for our educational system.”

The Chief Executive Officer, Financial Derivatives Company, Mr Bismarck Rewane, described the educational sector as a good business opportunity.

He, however, added that he could not understand how and why the Federal Government decided to take such a decision with the current delicate state of the capital market.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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