Finance Devt Projects with Long-term Funds, Experts Tell Govt
Minister of Finance, Ngozi Okonjo Iweala
Nnamdi Duru
Financial market experts have stressed the importance of long-term financing in Nigeria, saying that the country cannot develop without long-term funds.
They noted that in addition to ensuring efficient allocation of resources to productive sectors, long-term fund promoted and sustained social safety net, corporate governance and impacts positively on domestic savings and investment.
The experts made these observations at the one-day stakeholders’ forum on Nigeria’s pension system with theme “Investing Pension Funds for Economic Development,” organised by the Nigeria Economic Summit Group and National Pension Commission (PenCom) in Lagos Wednesday
Speaking on “Importance of Long-term Funds for Economic Development,” the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, advised public office holders and decision makers not to shy away from borrowing, saying that the country could not develop to the desired level without borrowed funds.
According to him, a nation could either save enough money to fund its development or borrow funds needed for development, adding that since Nigeria could not save as much as needed for development purpose, it had to borrow to fund its development projects.
Rewane also dismissed the argument that corruption was widespread in the economy, asking if it was better for the country to stop corruption by remaining under-developed.
“Nigerians are averse to borrowing but it is inevitable. That corruption has persisted does not mean we should remain perpetually in under-development. We cannot save our way to development but we can borrow our way to development,” he stressed.
Also speaking on “Pension Funds and Long-term Financing: The Contributory Pension Scheme and Economic Development in Nigeria”, the Director-General of PenCom, Mr. Muhammad Ahmad, observed that there was a shift to fully funded pension schemes across the globe because defined benefits schemes were expensive and unsustainable due to aging population and lower support ratio.
According to him, Nigeria ranked among the least in terms of the ratio of pension assets to Gross Domestic Products (GDP) for 2010 at seven per cent behind Netherlands (135 per cent), United Kingdom (89 per cent), Unites States of America (73 per cent), Chile, 67 per cent and Mexico (13 per cent).
Ahmad maintained that long-term assets was very important to any country, saying in addition to promoting a social safety net, it also ensured efficient allocation of resources and helps put funds needed for infrastructural development.
“It promotes and sustains social safety net (disability benefits, retirement and death benefits), ensures efficient allocation of resources to productive sectors, broadens the scope of economic activities, development of infrastructure, small and medium enterprises that ensures sustainable growth promotes capital formation and better corporate governance,” Ahmad said.
The director-general also noted that long-term assets impacted positively on economic development by generating an increase in domestic savings and investment as well as developing the capital market in the area of increase in the level of trading and modernisation of the market, increasing the volume of intermediation funds and new products.
Long-term fund, according to him, helped to deepen the capital market and reduced the cost of capital and facilitates the development of yield curve within the fixed income segment of the market.
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