A Professor of Finance and Banking, Faculty of Management Sciences, University of Port Harcourt, Chinaecherem Nwakanma, in this interview with Capital Market Editor, TAOFIK SALAKO, speaks on capital market and national economic development
Aschool of thought believes capital market studies should be made compulsory in tertiary institutions. What is your view on that?
There is this talk about financial literacy. In fact, I had participated in a workshop organised by owners of micro finance banks in the country in the past, where I spoke on ‘Financial Literacy as a Vehicle for Mobilising Funds for Investment and Efficient use of Resources in the Capital Market’. In my view, financial literacy issues should not been seen as a fire brigade activity, rather, it should be a structured and systematic effort towards inculcating financial discipline in the average Nigerian. As it is always said, ‘catch them young’. It should even start, if possible, at the rudimentary level from primary school to secondary and at the university level. We can expose them to critical issues such as prudent management of personal finance.
There was a time I gave a talk on corporate social responsibility. I said without the individual being personally or individually responsible as a citizen, his position in the office will not change. In that case, any organisation he or she is managing cannot be socially responsible. If, at a young age, people have been taught the principles of managing personal finance, they will carry the same culture on when they have opportunity to manage organisational resources.
But in what practical way can this be done in the tertiary institutions?
As a concept, financial literacy should be taken in university as one of the general studies (GST) courses in the first year for university undergraduates.That way, every person passing through the university system will have the opportunity to know what financial literacy is, what the capital market is, the various opportunities in the capital market and how to optimise these services and facilities for his own benefits. By so doing, they will extend it to their homes and to their communities and the whole system will galvanise towards greater financial economic management of resources in the society.
What is your own impression of the capital market?
The capital market is dynamic. It has come a long way since its inception in 1960, following the establishment of the Lagos Stock Exchange and the changes that have taken place over the years.These changes were made possible by the various reforms introduced by the government aimed at harnessing the enormous potential of the capital market to grow the economy. The private sector has responded positively by taking up the challenge and working assiduously towards ensuring that we have a vibrant capital market in Nigeria. The efforts of the Chartered Institute of Stockbrokers, in continuously upgrading the standards of professionalism, would surely improve the effectiveness and efficiency of the capital market, a sine qua non for achieving the desired economic development of the country.
As Nigeria yearns for development, how can the government leverage capital market opportunities in financing its fiscal operations?
First of all, the government should create an enabling environment that would stimulate activities in the capital market by opting to fund its infrastructural development projects through the capital market. To make this possible, the government should improve on the degree of fiscal responsibility by ministries, departments and agencies (MDAs) in their operations. Upholding fiscal responsibility should cut across all the strata of governance in the country- federal, state and local government to build the needed trust in government as a responsible user of financial services.
For example, government should improve on its credibility by ensuring that it pays its debt whether for recurrent or capital expenditures as at when due. A situation where most government functionaries treat their contractual financial obligations with levity promotes fiscal indiscipline and cripples the desired development of the financial markets in Nigeria. I don’t see the rationale in a state government owing workers’salaries for several months and expect economic activities to thrive in that state or independent contractors and service providers who are hamstrung to meet their obligations to their creditors because government has reneged on its obligation.
Second, the problem of funding capital expenditure by the government has been a critical concern to many patriotic Nigerians, who think that the level of capital projects implementation is less than desirable, hardly exceeding an annual average implementation rate of about 60 per cent. The government has often linked this inadequacy to the funding gap. Funding gap could be a serious constraint where the socio-economic benefits of capital projects lack critical appraisal in terms of its cost-benefit analysis, factoring in the financing sources, as a pre-requisite. Let’s face facts; it is unthinkable in this age of financial market-driven economy for MDAs to think that they can develop a bankable infrastructural programme without involving the operators of the capital market and hope to succeed with their plan. Several financing options that can be tailored to suit different infrastructural projects abound. By working with seasoned professionals in the capital market space, the success rate of conceptualising and implementing capital projects would certainly improve. Even the use of Public-Private Partnerships (PPPs), which appears as an alternative to direct government financing, can be enhanced by engaging capital market professionals in their conception and implementation.
What was your response when you were shortlisted for the Executive Conversion Programme (ECP) of the Chartered Institute of Stockbrokers (CIS)?
I see it as very commendable and a step in the right direction. I believe the Executive Conversion Programme (ECP) provides an opportunity to marry theory and practice. The programme shall have a salutary effect on the development of the practice of securities and investment business in Nigeria.
I was happy to be offered the opportunity. I saw it as something that would be of interest and challenge to me. It will assist to further deepen my knowledge of the securities and investment industry and also be of value to my career as a lecturer in the university. It will also impose on me the responsibility of strengthening my research base in the capital market operations. I should avail myself of the opportunity of access to the practical angle to make my students more interested in the securities business. By this, they can have viable career to pursue.
Research is critical to the academia. How would you leverage your background in research to assist the capital market?
Actually, I have always been keenly interested in the capital market. When I did my Master of Business Administration (MBA) several years ago, I conducted a research on ‘Pricing of Securities in The Nigerian Capital Market. This gave me a lot of insights into the happenings in the market. One of the issues I came across in my literature survey was that the level of professionalism was so low. Most of the practitioners then, that was over 20 years ago, were not really skilled in the theoretical aspect of investment analysis. I have been looking for an opportunity to be a participant in the capital market and to deal with securities issues. This is an opportunity for me because I am going to learn more about the nuances of the capital market.This will enrich my data base. For instance, I had conducted series of analysis on the efficiency of our local stock market and the findings had been mixed. By coming closer to what is happening in the industry, I will be more privileged to blend theory with practice.
What benefits did you derive from Executive Conversion training and how would it impact on your professional skills and your students?
I have come to see the difference between what is normally referred to as hands-on experience and theory. This is because, I listened to practitioners as they identified some of the practical issues that take place in the securities business and these were interesting. Though, they might not be theoretically correct so to speak, they expanded our horizon of knowledge to appreciate the differences between what is practice and the theory that we teach in the school. By the time we bring to bear the knowledge acquired in this rigorous training, we shall be able to communicate better to our students and also give them an insight into what to expect if they should elect to pursue careers in the securities business. I found the training a very useful experience, learning from those who have been in this business for so many years, people who had weathered the storms of the securities industry in Nigeria.
What is your motivation to become a chartered stockbroker?
As a researcher in the capital market, the opportunity to become a chartered practitioner will enable me to gain greater insight into the nuances of the practice and sharpen my understanding of the intricacies and peculiarities of our capital market, thereby adding value to the operations of the market.
From your experience, are students so much interested in making career in the capital market?
The students are not quite conversant with the prospects of the capital market industry in Nigeria. Many of them do not see it as something they can benefit from since they consider the field as too narrow and limited to buying and selling of stocks on behalf of clients. Given the low level of financial literacy about the capital market level and apathy of many Nigerians to stock ownership, they see the future as bleak.
How would you help in correcting this impression by students?
First, as a teacher and having understood the broad range of financial services being offered by professionals of the Institute, I’m in a better position to tell my students about career opportunities as investment professionals and encourage them to plan towards becoming professional members. Second, I will intensify my research into aspects of the capital markets that will improve informational and transactional efficiency. I will also look at the bottlenecks regarding the allocational efficiency of the market and attempt to proffer solutions for the attention of those concerned.
What is your advice for the CIS?
The institute should endeavour to expedite action on the change of its name that we understand is in the pipeline. This will remove the misconception of our students about the institute as a professional association with limited career prospects. The institute should organise talk shows that will improve on financial literacy and the prospects and risks of investing in the capital market. A good platform should be created to engage the government on the need to source medium and long-term funds from the market to execute development projects such as infrastructure. The continuing professional development programme should be made to blend the theory and practice of investing for the benefit of members.
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