How capital market can drive growth in agriculture sector –NGX

How capital market can drive growth in agriculture sector –NGX

The Nigerian Exchange Limited (NGX) says that the capital market can promote long-term growth in the Agriculture sector.

The Divisional Head, Capital Markets at NGX, Jude Chiemeka, stated this at the Agri-Investment and Capital Markets Conference (AICM2022), which held in Lagos recently.

Speaking on the topic “Financing the Nigerian Agri-Commodities Sector through capital market tools and infrastructure to promote economic development”, Chiemeka, said the capital market has readily available tools and infrastructure that can drive the much -needed growth in the Agricultural sector including corporate bonds, specific project bonds, and crowdfunding among others.

“According to the National Bureau of Statistics (NBS) report, Nigerians spent about N22.8 trillion on food items in 2019, representing more than half (56.7 per cent) of the total household expenditure of N40.2 trillion. This highlights the availability of a readily available market for Agriculture, which remains one of the largest sectors of the Nigerian economy and employs two-thirds of the entire labour force. Despite the vast opportunities in the Agric sector, the potential for sustainable growth in this sector is under-utilised”, he said.

He also revealed that as at 27 May 2022, the total market capitalization of the agricultural sector of the listed companies at NGX stood at N396.6 billion representing about 0.8 per cent increase from N185.81 billion in 2021.

While lauding the Federal Government and Central Bank of Nigeria (CBN) for their support in the sector through various policy formulations and intervention programs, Chiemeka said the Nigerian capital market provides opportunities for businesses in the sector to access long-term financing under the supervision of the Securities and Exchange Commission (SEC).

Citing an example of the tools available for agriculture through the capital market, Chiemeka said: “The Nigerian capital market provides many opportunities for unlocking the required long-term financing to bridge the funding gap in the country’s agriculture sector. One of such opportunities is the Central Bank of Nigeria (CBN)’s Differentiated Cash Reserve Requirement (DCRR) on which agriculture-focused companies can leverage by the securitization of their future cash flows.

To successfully access such financing, however, the financiers require the risks of investing in the sector to be mitigated to provide them comfort that their investments will generate returns”.

Meanwhile, the local bourse closed in the green territory amid profit-taking activities in heavyweights in the telecommunications and consumer goods sectors, as the All-Share Index advanced by 2.09 per cent week-on-week (w/w) to close at 54,085.30 points.

This came after the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) decided to hike the Monetary Policy Rate (MPR) by 150 basis points last week.

According to market data performance of the Nigerian Exchange Limited (NGX), the weekly gain which was buoyed by foreign investors’ renewed interest in Airtel Africa (+20.2 per cent), proved sufficient in offsetting losses in Guinness (-11.2 per cent), Nigerian Breweries (-10.0 per cent), and MTNN (-4.8 per cent).

Similarly, market capitalization closed at N29.158 trillion from N28.562 trillion as investors gained N596 billion. However, all other indices finished lower with the exception of the NGX-Main Board index which appreciated at 6.03 per cent, while the NGX Asem and NGX Sovereign bond indices closed flat.

Reacting to the weekly performance of the market, analysts at Cordros Research believe that negative sentiments will dominate market performance in the short term.

“Nonetheless, we think a short-term market correction will present opportunities for investors to make re-entry in stocks with sound fundamentals and attractive dividend yields. Overall, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings”, they said.