“Forex speculators are harming the economy” – Chairman of the Securities Dealers Association

Mr. Sam Onukwue is the Chairman of the Association of Stockbrokers of Nigeria (ASHON) and a member of the Chartered Institute of Stockbrokers (CIS).

In this interview with Nairametrics, he spoke on a number of issues that need to be addressed to boost activity in the Nigerian capital market, including how the government can strengthen the value of the Naira.

Nairametrics: What is your take on the current state of the economy in Nigeria?

Great Sam: The federal government should deal with macroeconomic vagaries such as exchange rate volatility and rising inflation rates.

These, among other things, continue to influence business decisions. We have limited sources of foreign exchange. The federal government has announced its plan to strengthen the supply side. Implementation should be given the highest urgency.

This concern is the source of demand pressure on forex. Is it from real traders and organizations or from speculators? Speculators hurt the economy by buying dollars to keep as a store of value for speculative purposes.

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The government can reverse the ugly trend by addressing the supply side. If the exchange rate is stable, it will have multiplier effects on other economic activities and increase the value of the Naira.

ASHON has repeatedly urged the Federal Government to use a range of commodity investments to create jobs, boost export trade and grow the Gross Domestic Product (GDP). A solid mineral is a cash cow.

The government should shine its spotlight on the sector to take control of the revenue and protect it from going into private pockets.

Nairametrics: Why do you think the issue of capital market leverage to finance infrastructure by government continues to be a central point of discussion in the financial market?

Great Sam: The capital market remains one of the best sources of medium and long-term finance for the government to bridge the infrastructure gap in Nigeria.

We at ASHON have always sought to see government at all levels use the fixed income market to finance infrastructure projects.

The constant oversubscription of SUKKUK bonds signifies the desire of investors for the safety of their capital in times of recession.

The capital market has the absorptive capacity to finance most infrastructure, which will reduce the government’s dependence on borrowing.

Nairametrics: What is the relationship between the capital market and the economy?

Great Sam: At a basic level, the capital market, especially the stock market, is a barometer that measures the economy. His series of statistics shows the direction of the economy.

Therefore, it is often said that there is a linear relationship between the development of the capital market and the economy.

The capital market provides a platform for the government to mobilize long-term funds to finance infrastructure. Companies use the market to raise funds for a range of projects, while retail and institutional investors need the market for capital formation and other benefits.

Studies have shown that there is a correlation between the development of an economy and its capital market.

Nairametrics: What should ASHON be concerned about in the rapidly changing market dynamics?

Great Sam: ASHON has always been at the forefront of ensuring that its members operate professionally while the Association works with capital market regulators, operators and other stakeholders in the ecosystem.

Our members played a pivotal role in, among other things, the recapitalization of banks and the demutualization of the stock exchange,

Nairametrics: How would you react to the new short term measures announced by the Tax Reform Committee to make Nigeria a tax friendly environment?

Great Sam: The Committee on Tax Reform, chaired by Mr. Taiwo Oyedele, has come up with some laudable quick wins to tackle the vexing issues of taxation militating against investment in Nigeria.

The fact is that while the official taxes in Nigeria are 60, people are faced with over 200 different types of taxes.

The committee’s recommendations will go a long way in restoring some level of healthy taxation in Nigeria, which will boost government revenue from the sector without causing pain to the majority of Nigerians. We are all waiting for the implementation.

ASHON has explored in various forums the need to revisit the Capital Gains Tax (CGT) to reduce transaction costs and attract all cadres of investors to the capital market.

This is in line with the need for the government to introduce market-friendly policies to encourage more companies to seek listings on the stock markets.

A favorable tax environment will make our market more competitive.

Nairametrics: Would you encourage investors to position themselves in the market at this time?

Great Sam: Regardless of the state of uncertainty in global financial markets, investors who adopt sound investment advice have opportunities for better investment returns on a consistent basis.

Many investors often lose huge sums of money by relying on their own intuition or consulting unqualified investment advisors.

Investing in any asset class requires many variables, including but not limited to the investor’s investment objective, risk tolerance, sources of funds and time horizon. Investment is a trade-off between risk and return, where the investor seeks the highest return with the lowest risk.

This can be achieved if proper analysis is done by certified investment advisors.

Our members will continue to engage investors in the need to work closely with stockbrokers for timely investment advice.

Nairametrics: What is your advice to investors on risk management?

Great Sam: There is no asset without an element of risk. A government bond is classified as risk-free, yet it cannot be isolated from inflation risk, exchange rate risk and many others.

We say that risk can be mitigated to ensure better returns. In every risky situation there are opportunities. The same goes for investments. It’s all about understanding and deploying appropriate investment strategies.

It’s not a game for everyone. Contacting a professional investment advisor is itself a measure of risk aversion. Investment professionals profile their clients as a prerequisite for advising on suitable investment opportunities.

Nairametrics: How would you describe the relationship between the government and stockbrokers?

Great Sam: We are partners in development, but the government can do much more by taking input from stockbrokers whenever political issues are raised in the financial market.

We expect a more cordial relationship following the appointment of two of our members at the heart of the economy – the Minister of Finance and the Coordinating Minister of the Economy and Mr. Yemi Cardoso, the new Governor of the Central Bank (CBN).

Stockbrokers play a major role in the capital market and are the most visible operators. Every stockbroker is certified by the Chartered Institute of Stockbrokers (CIS), while at the corporate level we have ASHON, of which I am the chairman.

ASHON is a registered trade group with the Securities and Exchange Commission (SEC). Market development is at the heart of ASHON and CIS activities.

Every year, each group provides the government with plans for how it can use the market to grow the economy.

The challenge is the inability of the government to use our contribution.

The worst part is that the federal government does not receive input from market players on any capital market policy, while the operators are the bridge between the government and investors.

This is one of the areas we believe the new administration would bring about change to rejuvenate the economy.

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