The Director-General, Lagos Chambers of Commerce and Industry (LCCI), Mr. Muda Yusuf has said that the current monetary policies of the Federal Government are militating against the growth of the capital market, and has called on the government to take immediate actions that would lift the economy from its current poor state.
Yusuf said this at the seventh annual conference of the Institute of Capital Market Registrars themed, ‘Understanding monetary and fiscal policies in the management of the economy – issues, challenges, analysis and the impact on the capital market.’
He said liquidity should be restored to the foreign exchange market in order to bring back investors’ confidence in the economy, adding that there was the need to review trade policy to enhance disposable income and private sector investment spending.
He said the high cost of borrowing as represented in Treasury bill rate and the bonds was crowding out the private sector in the financial market, thereby affecting the growth of investment and financial intermediation.
According to him, the tight monetary policy in the form of high cash reserve ratio (30 per cent), liquidity ratio(22 per cent), monetary policy rate (12 per cent) has led to an increase in interest rate and better returns on investment in the money market.
“This is a disincentive to investment in the capital market. High-interest rate is not good for firms in the real sector, many of which are listed on the Nigerian Stock Exchange. This has implications for return on investment for those firms and by extension ROI on investment on those equities,” he said.