The Managing Director, Lagos Chambers of Commerce and Industry, Muda Yusuf, has said that the Federal Government’s monetary policies are responsible for the crisis in the capital market.
The LCCI boss disclosed this at the seventh annual conference of the Institute of Capital Market Registrars with the theme, “Understand monetary and fiscal policies in the management of the economy-issues, challenges, analysis and the impact on the capital market’
He added that there was the need to review trade policy to enhance disposable income and private sector investment spending.
He called on the government on the government to take immediate actions that would lift the economy from its current poor state, adding that liquidity should be restored to the forex market in other to bring back investors’ confidence in the economy.
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,” the LCCI DG said.