High Interest Rates on Govt Treasury Securities Pose Challenges
By Patience Ikpeme
The Securities and Exchange Commission (SEC) has cried out over the high interest rate government treasury securities attract.
A press release from the third 2023 Capital Market Committee (CMC) meeting said the SEC boss Lamido Yuguda is worried about the high interest rate on government treasury securities will shift interest away from the capital market.
Lamido Yuguda highlighted the pressing need for strategic initiatives to attract more investments into the capital market, amid challenges posed by high-interest rates on government treasury securities.
These challenges can have wide-ranging impacts on investment attractiveness, access to financing for businesses, crowding out effect.
High-interest rates on government treasury securities tend to make them a more appealing investment option compared to the capital market, thereby reducing investments flowing into the latter.
This can hamper the growth and investment plans of businesses, as they may struggle to secure affordable financing from lenders. Moreover, when the government offers higher interest rates on its securities, it attracts a substantial portion of available investment capital, crowding out private sector borrowing and limiting access to vital funds for expansion and development.
Consequently, this can lead to an economic slowdown, with reduced investment in industries, businesses, and infrastructure, impacting job creation and hindering economic development.
To address these challenges, Yuguda underscored the importance of implementing strategic measures designed to entice additional investments into the capital market. These initiatives aim to stimulate economic growth and enhance the functioning of the financial system, ultimately aligning with the Renewed Hope Agenda of the President, Chief Ahmed Bola Tinubu administration.
Providing a positive update, the SEC boss noted that despite lower foreign portfolio investment inflows, the Nigerian stock market has achieved a remarkable milestone, with the All-Share Index crossing the 70,000-point mark thus reflecting an impressive 30 percent increase this year.
This accomplishment he said signifies upward momentum and investor confidence in the market.
Yuguda also spoke about various developments in the capital market, including new issuances, mergers and acquisitions, and regulatory measures such as directives on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance.
He equally highlighted the Commission’s focus on digitization, market modernization, Human Resources (HR) restructuring, and collaboration with stakeholders from both domestic and international arenas.
Also at the meeting, the Central Securities Clearing System (CSCS), drew attention to the performance of CSCS, by reporting a 23 percent growth in the average daily clearing and settlement value to approximately N10.7 billion in Q3 ’23, albeit dropping to N5.3 billion in Oct ’23.
This growth is primarily attributed to the bullish sentiments and solid performance of key equities in their half-year results, leading to a 60 percent year-on-year increase as of October 2023.
Addressing investor KYC (Know Your Customer), the CSCS noted a 31 percent increase in the number of accounts updated in Q3 2023, totaling 8,572 accounts, as a result of positive market sentiments.
The CSCS called for a coordinated awareness campaign on updating KYC details and emphasized the importance of market-wide collaboration and comprehensive campaigns across various media channels and underscored the importance of developing additional pathways for KYC data updates beyond trading.
Additionally, the CSCS emphasized the need for cooperation among Registrars to share investors’ bio-data details on dividend claims with the Depository. This collaborative effort is expected to increase the number of accounts with updated records.
