Patrick Wemambu
How do you unlock wealth while leveraging entrepreneurial knowledge ecosystem towards understanding capital harnessing essentialities? This was a tough nut Prof. Uche Uwaleke, Nigeria’s first professor of the capital market endeavoured to crack as he delivered a paper on the subject-matter at the
50th Inaugural Lecture of the Nasarawa State University, Keffi last week.
Positing that Nigeria is considered rich largely because of her abundant natural resources and youthful population, Uwaleke upheld that yet the country is considered poor chiefly because majority of her citizens are multidimensionally poor. Classified as a Lower-Middle-Income Country (LMIC) by the World Bank – a classification that only reflects the income per capita but does not capture Nigeria’s hidden wealth, the highly cerebral scholar opined that the country’s immense idle resources can be unlocked by mobilizing funds from the capital market to develop the requisite skills and supportive environment – which he collectively referred to as the entrepreneurial Knowledge ecosystem.
“Over the years, there is evidence to suggest that money raised from the debt capital market for capital projects ended up being used to meet recurrent needs in breach of the FRA 2007. This funding mismatch has worked against any effort to harness the country’s idle resources,” he stressed.
Highlighting the fiscal barriers to wealth creation, the guest lecturer charged that to enhance Debt Sustainability, borrowing plans should be linked more to debt service ceilings than other debt indicators such as GDP.
“Consistent with the FRA 2007 and in view of the country’s huge debt burden, governments should borrow only to fund projects that are self-liquidating.
In order to optimally diversify the country’s debt portfolio, other external funding windows such as the growing renminbi (RMB) market should be explored with the overarching objective of securing the best deals that reduce borrowing costs.”
What does it take to build entrepreneurial knowledge and how should policy makers in Nigeria go about it? The speaker inquired.
Cogitating on entrepreneurial knowledge as the embodiment of the skills and competencies necessary for unlocking wealth in any economy, Prof. Uwaleke confirmed that amid budget constraints – the government can make higher education more cost-effective by prioritizing resources in favour of academic disciplines that support industrial development and which are directly tied to economic outcomes. In this regard, Nigeria can draw from the experience of other countries.
He butressed his views; “China: The country’s Double First-Class Initiative aims to elevate select universities to global rankings by investing heavily in fields such as artificial intelligence, engineering, and natural sciences. Companies that establish joint labs or fund high-tech research, are recognized as ‘High and New Technology Enterprises’ (HNTEs). This status grants a reduced corporate income tax rate of 15% (down from the standard 25%).
Singapore: The Skills Future program is a flagship initiative by the Singapore government which offers funding for companies that invest in training and skills development for students. Under this scheme, companies collaborating with universities to upskill students can receive subsidies for training programs.
“South Korea: the government provides substantial funding for science and engineering programs through initiatives like the Brain Korea 21 (BK21) program. Universities have been restructured to focus more on technology-driven fields, with less emphasis on traditional arts and humanities under the Program for Industrial Needs-Matched Education (PRIME).
South Korean companies, particularly in technology and manufacturing, collaborate directly with universities to develop tailored training programs for students. Companies, like LG Electronics, Samsung, Airbus Asia, establish research labs and training centers on university campuses to train students in industry-relevant skills.”
Submitting that the South Korean and Chinese examples of strong integration of academia and industry to build entrepreneurial knowledge and unlock wealth provide a replicable model for a country like Nigeria, the audience learnt that governments at all levels can optimize the use of scarce resources by prioritizing the funding of higher education in favour of what the speaker called pillar courses namely Agriculture, Medical Sciences, ICT and Engineering (AMIE). He reminisced that over the years, underinvestment in the aforementioned areas had resulted in low enrolment of students in those fields and consequently reduced productivity.
“There is (therefore) an urgent need to make funding of public universities in Nigeria more effective and result-oriented, by linking it to national development plans through a scale of preference that optimizes available scarce resources
For example, the current medium-term National Development Plan (2021-2025) envisions that by 2025, ‘Nigeria’s agriculture and food ecosystem will experience at least a 10% annual growth rate’.
“To this end, it has the goal of increasing ‘the national output and productivity of six priority value chains of food crops (cassava, maize, rice, soya, tomato & yam), as well as the poultry, fisheries, and dairy value chains, ensuring adaptation to climate change’ (See page 2 of the NDP summary of goals and vision for the agriculture and food security sector),” the former commissioner for finance in Imo State who doubles as a fellow of the Chartered Institute of Stockbrokers maintained.
Curious that the NDP has not cut out any specific roles for the Federal Universities of Agriculture located in Makurdi, Umudike and Abeokuta with respect to achieving self-sufficiency in food production, neither does it specify any roles for the Federal Universities of Technology located in Akure, Minna, Owerri and Yola with regard to driving industrialization particularly in relation to Micro Small and Medium Enterprises, Prof. Uwaleke rationalized that these specialized Universities should be given clear mandates and tasked to demonstrate their researches and innovations in pursuit of wealth creation and national development.
If anything, effective implementation of the NDP requires that these Universities receive special attention in terms of funding to be able to champion the execution of these priority areas and discharge special mandates arising from the NDP.
“Essentially, the model I am canvasing here requires that universities should be funded based on a formula which factors in individual peculiarities and a desire to promote programs in agriculture, medicine, ICT and Engineering with huge potential to positively transform Nigeria’s socio-economic landscape.
“To this end, the Ministries of Education, Budget & National Planning and Science & Technology should jointly draw up a list of courses and programs that are critical to the success of the NDP and mandate the Tertiary Education Trust Fund to skew interventions in favour of these courses, (even if that will require an amendment to the TETFund Act),” he advised, explaining that by the same token, the National Education Loan Fund (NELFUND) should prioritize students in AMIE programs to ensure that they are all covered.
His argument; “As government’s resources improve, conventional universities running traditional courses may benefit from the differentiated funding model if they can show proof of restructuring their programs to reflect priority areas. For example, just like NSUK has done, B.Sc Statistics programme can be restructured as B.Sc Statistics and Data Analytics etc. This revolution in higher education will require a review of the current NUC minimum academic standards (CCMAS).”
With regards to raising long-term funds for developing entrepreneurial knowledge, the Central Bank of Nigeria also has a role to play – the inaugural lecturer stated. According to him, the first is to champion the recapitalization and restructuring of the country’s development finance institutions (DFIs) especially the Bank of Agriculture (BOA) and the NEXIM. On graduation, we are told, students from the AMIE programs can be assisted to register companies for the purpose of accessing long term concessional loans from the DFIs.
Dissecting the nexus between Entrepreneurial Knowledge Ecosystem and the Capital Market, the professor of capital market studies
postulated that in essence, the entrepreneurial knowledge ecosystem can be the backbone that unlocks wealth and fosters strong economic growth. His analysis; “Entrepreneurial knowledge is critical for understanding how to access, manage, and optimize resources.
“While educational Institutions represent a major stakeholder in this ecosystem, the government is expected to facilitate a conducive environment for developing entrepreneurial knowledge. The connection between entrepreneurial knowledge ecosystem and the capital market lies in how the latter serves as a crucial enabler for entrepreneurs and governments, offering the platforms and providing long-term resources needed for funding innovation and unlocking wealth.”
Much as the Nigerian capital market has recorded remarkable improvements in the last decade, the audience was told that a number of challenges inhibit the realization of its potentials.
Hypothesizing that at less than 15% of Nigeria’s GDP, the current size of the capital market constrains its role in national economic development, Uwaleke announced that the issuer base is not diversified with the NGX dominated by a few companies which leaves the market vulnerable to shocks. This, he added, is demonstrated by the fact that only 10 (out of 151 listed companies) account for over 60% of equities market capitalization.
Relative to Nigeria’s population of over 200 million people, the President of the Capital Market Academics of Nigeria contended that retail investors’ participation at less than 5 million is low. According to him, equally of concern is the low participation of youths in the capital market given that the average age of retail investors is over 40 years which does not reflect the country’s demographics with a significant youth population.
Without a doubt, he continued, any effective strategy for ramping up retail investor participation should emphasize financial market literacy and leverage the current demographics in the country which emphasize a large youthful population, who represent a huge reservoir of entrepreneurial knowledge.
“As we continue to witness improvements in the macroeconomic environment, the need to access long-term capital to accelerate economic growth cannot be overstressed. To this end, I propose the adoption of the IPO (Incentives, Privatization, Optimization) approach to strengthen the capital market in Nigeria and harness long term funds required to develop entrepreneurial knowledge ecosystem and unlock wealth.
“Incentives: This could take various forms and have the potential of encouraging more companies to seek quotation on the Exchange. Introduction of a tiered corporate tax system in favour of public companies listed on the Exchange, tax breaks to newly quoted companies for a fixed period of time (say, one year) are some examples,” the erudite scholar mooted.
Concluding, the inaugural lecturer submitted that unlocking Nigeria’s hidden wealth through the capital market will involve leveraging the market’s potential to mobilize, allocate resources and grow the entrepreneurial knowledge ecosystem.
In order to achieve this, he warned that governments at all levels should deploy the right approach to incentives for capital formation, privatization of public enterprises via the capital market as well as optimization of resources in ways that guarantee value for money. He was convinced that only then will Nigeria be seen to be on the sure path to unlocking her massive hidden wealth.
