The Capital Market and Human Security:
Whole of Society Approach
Uche Uwaleke PhD
Professor of Capital Market
Nasarawa State University Keffi
Being a lecture delivered to Course 30 Participants, National Defence
College. October 20 2021

Outline
 Introduction
 Concept of Human Security
 Issues/State of Human Security in Nigeria
 Overview of the Nigerian Capital Market
 Issues/Challenges of exploiting Whole of society (WOA) approach
in the Nigerian Capital Market
 Capital Market Pathways to achieving economic sustainability for
enhanced human security in Nigeria
 Conclusion
Prof Uche Uwaleke Presentation

Introduction
 Security is a state of being free from fear, threat, danger,
molestation, intimidation and harassment in all respects. The
absence of these conditions whether to an individual or group
implies insecurity (Ndanusa, 2018)
 According to Adesola (2007), national security is traditionally
viewed as the protection of the territorial integrity of a state
and the protection of its citizens from external threats with
specific focus on protection against military attack.
Prof Uche Uwaleke Presentation

…Introduction
 In recent times, the emergence of new threats that defy military
solutions have driven scholars to challenge traditional definition of
security
 Thus, security has been redefined to include not only freedom from
physical threats but also material well being of individuals
(Ngwube, 2013 cited in Ndanusa, 2018)
 Therefore, Human security emerged as a challenge to ideas of
traditional security, (often referred to as national security or state
security) which is chiefly about a state's ability to defend itself
against external threats.
Prof Uche Uwaleke Presentation

..Introduction
 However, human and national security are not mutually
exclusive. It has been argued that, without human security,
traditional state security cannot be attained and vice versa
(Tadjbakhsh & Chenoy 2006).
 Human security has a connection with the capital market
which exists for the mobilization of long term capital.
 The ultimate goal of capital markets is sustainable growth and
development through the provision of long term capital
Prof Uche Uwaleke Presentation

..Introduction
 On the one hand, lack of human security has adverse
consequences on the capital market as it hinders the ability
of economic agents to participate in the capital market; on
the other hand, the capital market can provide funds needed
to ensure human security
 Human security forms an important part of people’s well-
being and is therefore an objective of capital markets.
Prof Uche Uwaleke Presentation

..Introduction
 In other words, human security and capital market are people
centred- both address the root cause of poverty.
 Both are inextricably linked since progress in one enhances the
chances of progress in another while failure in one increases
risk of failure of another
 How can the capital market, via its stakeholders (Whole-of-
Society), facilitate human security in Nigeria?
Prof Uche Uwaleke Presentation

Concept of Human Security
Prof Uche Uwaleke Presentation

Concept of Human Security
 The concept of human security emerged in the late 1980s and
early 1990s.
 It gained prominence as part of the holistic paradigm of human
development contained the United Nations Development
Program (UNDP) 1994 Human Development Report.
 It proposed the shifting of focus of security from the protection
of the state and its borders by military means to the protection
of individuals from a wider range of threats to their well-being
and security.
Prof Uche Uwaleke Presentation

..Concept
 The UNDP 1994 Human Development Report defined human
security as including safety from threats such as disease,
hunger and repression as well as the protection of people from
sudden and hurtful disruptions in their daily lives.
 The UNDP Report asserts that ensuring "freedom from want"
and "freedom from fear" for all persons is the best path to
tackle the problem of global insecurity.
 It argues that the scope of global security should be expanded
to include threats in seven areas:
Prof Uche Uwaleke Presentation

..Concept
 Economic security – Economic security requires an assured basic
income for individuals, usually from productive and remunerative
work or, as a last resort, from a publicly financed safety net.
Unemployment problems constitute an important factor underlying
political tensions and ethnic violence.
 Food security – Food security requires that all people at all times
have both physical and economic access to basic food. According to
the United Nations, the overall availability of food is not a problem,
rather the problem often is the poor distribution of food and a lack
of purchasing power.
Prof Uche Uwaleke Presentation

..Concept
 Health security – Health security aims to guarantee a
minimum protection from diseases and unhealthy
lifestyles.
 According to the United Nations, in both developing and
industrial countries, threats to health security are
usually greater for poor people in rural areas due to
insufficient access to health services, clean water and
other basic necessities.
Prof Uche Uwaleke Presentation

..Concept
 Environmental security – Environmental security aims to protect
people from the short- and long-term man-made threats to nature,
and deterioration of the natural environment. In developing
countries, lack of access to clean water resources is one of the
greatest environmental threats. In industrial countries, one of the
major threats is air pollution caused by the emission of greenhouse
gases.
 Personal security – Personal security aims to protect people from
physical violence, from violent individuals or domestic abuse.
Prof Uche Uwaleke Presentation

..Concept
 Community security – Community security aims to protect people
from sectarian and ethnic violence. Traditional communities,
particularly minority ethnic groups are often threatened.
 Political security – Political security is concerned with whether
people live in a society that honours their basic human rights.
Human rights violations are most frequent during periods of
political unrest. Along with repressing individuals and groups,
governments may try to exercise control over ideas and
information.
Prof Uche Uwaleke Presentation

..Concept
 In a nutshell, Human Security encapsulates the UN
Agenda 2030 SDGs- one that seeks among others an
end to extreme poverty and hunger; a low carbon,
climate-smart economy with decent jobs, inclusive
growth and shared prosperity.
 Distinction between human security and traditional
security is summarized in the following table
Prof Uche Uwaleke Presentation

..Concept
Table 1 Traditional Security Human Security
Referent Traditional security protects a state's
boundaries, people, institutions and values.
Human security is people-
centered. The important
dimensions are to entail
the well-being of
individuals
Scope Traditional security seeks to defend states
from external aggression
Human security expands
the scope of protection to
include a broader range of
threats, including
environmental pollution,
infectious diseases, and
economic deprivation.
Prof Uche Uwaleke Presentation

..Concept
Traditional Security Human Security
Actors The state is the sole actor.
Decision making power is
centralized in the government.
The realization of human
security involves not only
governments, but a broader
participation of different actors,
viz. international organizations,
NGOs and local communities.
Means Traditional security relies upon
building up national power and
military defense. The common
forms it takes are armament
races etc.
Human security not only
protects, but also empowers
people and societies as a means
of security. People contribute by
identifying and implementing
solutions to insecurity.
Prof Uche Uwaleke Presentation

State of Human Security in Nigeria: Some
stylized facts/Issues
Prof Uche Uwaleke Presentation

Table 2: RGDP Growth Rate (Annual %) (source: World Bank)
Year Nigeria South Afr Ghana India China
2010 8.01 3.04 7.90 8.50 10.64
2011 5.31 3.28 14.05 5.24 9.55
2012 4.23 2.21 9.29 5.46 7.86
2013 6.67 2.49 7.31 6.39 7.77
2014 6.31 1.85 2.90 7.41 7.42
2015 2.65 1.19 2.18 8.00 7.04
2016 -1.62 0.40 3.45 8.26 6.85
2017 0.81 1.41 8.14 7.04 6.95
2018 1.92 0.79 6.26 6.12 6.75
2019 2.21 0.15 6.48 5.02 6.11
Prof Uche Uwaleke Presentation

• Nigeria’s Per capita Income, dropped from $2412 in
2018 to $2386 in 2019 in spite of the increase in GDP
growth rate while, that of SA and Ghana increased
Table 3: GDP Per Capita (Constant 2010 $) source: World Bank
Year NGR Ghana SA India China
2013 2476.864 1618.598 7563.993 1544.619 5710.588
2014 2563.9 1627.76 7582.697 1640.181 6103.59
2015 2563.149 1625.906 7556.789 1751.664 6500.282
2016 2456.306 1644.598 7476.621 1875.732 6907.962
2017 2412.367 1739.467 7476.386 1986.633 7346.611
2018 2395.97 1808.327 7433.615 2086.451 7806.953
2019 2386.872 1884.285 7345.962 2169.14 8254.301
Prof Uche Uwaleke Presentation

• In Nigeria, data from the Global Consumption and Income
Project (GCIP, 2019) showed that the rate of poverty
overtime has been significantly high.
 On average, between 1960 to 2015, poverty headcount in
Nigeria was 61.8% of the population peaking at 79.6% in
2000.
 In the area of Human Development Index (HDI) which is a
summary measure for assessing long-term progress in
three basic dimensions of human development: a long and
healthy life, access to knowledge and a decent standard of
living, Nigeria has not made any significant progress.
• Number of children out of school in Nigeria (aged 5-14
years) was 13.7 million in 2019 (World Bank, 2021).

• With a population of about 200million in 2019,
about 80.5 million Nigerians were living below the
poverty line according to the World Bank.
• T
Selected Economic Indices
Year Population Population Growth
Pov (%).
(<$1.90)
Population in
Poverty (million)
2010 158503197 2.67 54.43 86,273,290.13
2011 162805071 2.68 54.9 89,379,983.98
2012 167228767 2.68 55.01 91,992,544.73
2013 171765769 2.68 55.21 94,831,881.06
2014 176404902 2.67 55.9 98,610,340.22
2015 181,137,448 2.65 55.8 101,074,696
2016 185960289 2.63 57.2 106,369,285.30
2017 190873311 2.61 61.2 116,814,466.30
2018 195874740 2.59 39.1 76,587,023.34
2019 200963599 2.56 40.1 80,586,403.20
Prof Uche Uwaleke Presentation

• In relation to HDI, Nigeria dropped three spots to 161 in 2019 from
158 in 2018 among 189 countries in the 2020 HDI (UNDP, 2021).
• The country’s HDI value for 2019 was 0.539 which put the country in
the low human development category when compared to countries
like South Africa, Ghana and India.
Table 5: HDI for Selected Countries
Country Nigeria South Africa Ghana India
2015 0.526 0.701 0.59 0.624
2016 0.526 0.703 0.598 0.63
2017 0.531 0.705 0.602 0.64
2018 0.534 0.707 0.606 0.642
2019 0.539 0.709 0.611 0.645
2019 HDI Ranking 161 114 138 131
Prof Uche Uwaleke Presentation

• The national unemployment rate rose from 18.5
percent in 2017 to 23.42 percent in 2019 as shown
in figure 1.
Figure 1:National Unemployment Rates(%)
Source: NBS (2020)
21.1
15.8 16.2 16.7 17.1 17.6 18 18.5
23.1 23.42
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Percentage
(%)
Years
Prof Uche Uwaleke Presentation

.. Human Security: Issues
Real GDP growth rate below annual population growth rate
• 2015 2.7
• 2016 -1.62
• 2017 0.81
• 2018 1.92
• 2019 2.21
• 2020 -1.92 (later revised)
• Population growth rate annual 2.6%
Sources: NBS, Macrotrend
Prof Uche Uwaleke Presentation

.. Human Security: Issues
• The inability of real GDP growth to exceed population growth
rate has fuelled poverty.
• Poverty rate- latest estimate by NBS 40.1% (82.9 million people
are poor)
• Situation is made worse by rising inflation rates.
• Stagnant economic growth amidst rising inflation has given rise
to stagflation
Prof Uche Uwaleke Presentation

.. Human Security: Issues
Prof Uche Uwaleke Presentation

.. Human Security: Issues
 Pursuit of low inflation and GDP growth has been hindered by
huge Infrastructure gap.
 Infrastructure stock represents only 35% of GDP far below that
of peer countries
 In order to narrow this gap, according to the National
Integrated Infrastructure Master Plan, Nigeria needs to invest
$3 trillion in infrastructure over the next 30 years - $100bn
annually in other words.
 This translates to a yearly investment of N36trn
Prof Uche Uwaleke Presentation

.. Human Security: Issues
35
47
58
70
76
87
0
10
20
30
40
50
60
70
80
90
100
Nigeria Brazil India Indonesia China South Africa
Infratructure stock as % of GDP
source: National Integrated Infrastructure Master Plan
Prof Uche Uwaleke Presentation

.. Human Security:Issues
• Little wonder the country’s debt stock is growing
• Now reaching unsustainable levels.
• With dwindling revenue, debt service ratio is on the rise
heightening vulnerability to debt distress
• At circa 24%, Nigeria’s debt to GDP ratio is below international
thresholds (DMO)
• But the real debt burden is from the debt service to revenue ratio.
• Debt servicing gulped 97% (N3.34trn) of FG’s total revenue
(N3.42trn) in 2020 (source: BudgIT)
Prof Uche Uwaleke Presentation

Nigeria's TotalDebtStock as at31stDecember, 2014- 2020and Q1 2021
YEAR USD MILLION (₦" MILLION)
2014 67,726.28 11,243,120.22
2015 65,428.53 12,603,705.28
2016 57,391.53 17,360,009.58
2017 70,999.26 21,725,773.03
2018 79,436.72 24,387,071.74
2019 84,053.32 27,401,381.27
2020 86,392.54 32,915,514.85
Q1,2021 87,239.12 33,107,247.23
Prof Uche Uwaleke Presentation

.. Human Security: Issues
 So, the fiscal imbalance is widening as the government continues
to rely on borrowing to finance spending plans.
 Leading the DMO to increase borrowing threshold in relation to
GDP from 25% to 45%.
 Recently, worsening insecurity necessitated a supplementary
budget of nearly N1 trillion approved by the National Assembly.
 Expectedly, fiscal deficit as a percentage of GDP is on the rise and
breaching the 3% limit allowed by the Fiscal Responsibility Act
2007
Prof Uche Uwaleke Presentation

.. Human Security: Issues
1.28 1.14 1.14
2.09
3.09
3.82
4.52
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2012 2013 2014 2015 2016 2017 2018
Deficit as % of GDP
Prof Uche Uwaleke Presentation

Selected economic indicators
Key macro variables: sources NBS, CBN, DMO
Inflation rate 16.63% (September 2021)
Unemployment rate 33.3% (Q4 2020)
Real GDP growth rate 5.01% (Q2 2021)
Exchange rate N410.15/$1 (Official)
Public Debt stock circa N35 Trn (Q2 2021)
Prof Uche Uwaleke Presentation

The Capital Market
Prof Uche Uwaleke Presentation

..the capital market
• Capital market is the market where medium and long terms
finance can be raised.
• Capital market enables companies to raise funds for expansion
and the government for the provision of infrastructure.
• This results in increase in productivity within the economy,
more employment and hence growth and development.
Prof Uche Uwaleke Presentation

OVERVIEW OF THE NIGERIAN CAPITAL MARKET source: Uwaleke
2021
MoF
SEC IST
SROs/FMI -NSE FMDQ NASD AFEX NCX LCFE CSCS
CMOS
Trade
Groups
Investors Issuers
Equities
Bonds
ETFs
ABS
Derivatives
KEY
MoF – Ministry of Finance
SEC – Securities & Exchange Commission
IST – Investment and Securities Tribunal
SROs – Self Regulatory Organizations
FMl – Financial Market Infrastructure
NSE – Nigerian Stock Exchange
FMDQ – Financial Market Dealers Quotation
NASD – Natioal Association of Securities Dealers
NCX – Nigerian Commodity Exchange
LCFE – Lagos Commodity and Futures Exchange
CSCS – Central Securities Clearing System
CSOs – Capital Market Operators
ETFs – Exchange Traded Funds
ABS- Asset Backed Securities

The Nigerian Exchange
 Equities
 Bonds
 Exchange Traded Products
FMDQ OTC Securities Exchange
 Fixed Income
 Money Market
 Currency
 Derivatives
The Nigerian Commodity Exchange
 Commodities (Spot)
NASD OTC Securities Exchange
 Unlisted Public Equities
AFEX Commodities Exchange
 Commodities (Spot)
Exchanges
..OVERVIEW: NIGERIAN CAPITAL MARKET TRADING ECOSYSTEM Source: SEC 2019
Prof Uche Uwaleke Presentation

Issues/Challenges of the exploiting the WOS
Approach in the Nigerian Capital Market
Prof Uche Uwaleke Presentation

.. Challenges
 Relatively low retail investors and MSME’s participation
 Due in part to low capital market literacy level especially in the
North East and South East regions of the country.
 Weak commodity trading ecosystem
 Issuer base concentrated and not diversified.
 Shallow market: Small number of listed companies. Low market cap
as a percentage of GDP.
 Only 7 companies constituted 75% of total market cap on July 26
2021
Prof Uche Uwaleke Presentation

.. Challenges : Market Concentration source: author’s adaptation
Company
Market
capitalization
N Trillion
Percentage
As at 26/07/2021
Dangote
Cement
4.23 20.9%
MTN 3.32 16.4%
BUA Cement 2.41 12%
Airtel Africa 2.31 11.4%
Nestle 1.22 6.1%
GTB 0.87 4.3%
Zenith 0.78 3.9%
Others 5.01 25%
Total Mkt cap 20.15 100%
75%
25%
High Cap
Others

.. Challenges
Source: SEC
0
50
100
150
200
250
300
350
Market Capitalization% of GDP
Prof Uche Uwaleke Presentation

.. Challenges: ECONOMYIC SECTORS VIS-A-VIS STOCK MARKET source: SEC
Sector Market Cap.(N'b) Sector Share in Market
Cap. %
Agriculture 171.88 0.82
Conglomerates 61.39 0.29
Construction/Real Estate 43.18 0.21
Consumer Goods 2,354.01 11.19
Financial Services 3,846.85 18.29
Healthcare 33.76 0.16
ICT 6,678.58 31.75
Industrial Goods 7,286.25 34.64
Natural Resources 6.69 0.03
Oil & Gas 457.11 2.17
Services 93.15 0.44
Total 21,032.84 100.00
 Equities market cap at end of 2020 was N21.03trn.
 Nigerian capital market concentrated in Industrial goods
(34.64%), ICT (31.75%), Financial services (18.29%) &
Consumer goods (11.19%).
 However, the entire economy, as indicated by GDP is
concentrated in Services (26%), Agriculture (25%),
Industrial/Consumer goods (14%), Construction/Real estate
(13.5%) and ICT (11%)
 More companies still needed in the Nigerian capital market
for it to be representative of the economy and contribute
more to Nigerian growth and development.
Over N3.1 Million companies registered by the CAC as at 2018 but only 160 companies on NGX, and less than 50 on NASD

..Challenges
• Provision of capital market services still concentrated in a few
major cities especially Lagos and Abuja
• Low Mutual Fund penetration- only 441,267 CIS participants as
of 31 December 2020 (SEC).
• Nigeria has the highest population in Africa
• Yet mutual fund asset as a percentage of GDP is the least in the
continent at 0.35%. The highest value was in South Africa at
52.02%
Prof Uche Uwaleke Presentation

..Challenges
52.02
31.7
2.13
0.35
0
10
20
30
40
50
60
SA Namibia Uganda Nig
Mutual Fund Asset as % of GDP
Prof Uche Uwaleke Presentation

..Challenge: small size of Infrastructure Bonds
FGN DOMESTIC DEBT BY INSTRUMENT as at March 31 2021. Source: DMO
FGN BONDS 75.48%
Treasury Bills 15.77%
Treasury Bonds 0.61%
FGN Savings Bond 0.09%
FGN SUKUK 2.20%
GREEN BOND 0.16%
Promissory Notes 5.69%
Total 100%
Prof Uche Uwaleke Presentation

Capital market Pathways to economic
sustainability for enhanced Human
Security in Nigeria
Prof Uche Uwaleke Presentation

Pathways
 The capital market can facilitate the financing of investments
for the provision of basic services to the citizens.
 Improving access to basic services such as water, power,
health services and education is necessary to reach the SDGs
and ensure human security
 Whole-of-Society approach involves all stakeholders such as
investors, regulators, government and non-state actors
Prof Uche Uwaleke Presentation

Pathways
 Mutual Funds/Collective Investment Schemes
 Private Equity/Venture Capital
 Infrastructure, Green, Social and Sustainability Bonds
 Asset Securitization
 Privatization
 Commodity Trading Ecosystem
 Effective regulation
 The WOS approach requires the collaboration of the public and
private sectors in all these areas
Prof Uche Uwaleke Presentation

..Pathway: Mutual Funds
Mutual Funds
• Mutual Funds (Collective Investment Schemes) pool funds from various
investors for the purpose of investing in a portfolio of securities such as
shares, bonds, treasury bills, etc
• Mutual Funds (CIS) represent veritable channels of access to financial
markets by low income earners.
Private Equity/Venture Capital
Private equity is capital invested in an entity that is not publicly listed.
Venture capital is funding provided for startups or young businesses that
show potential for long term growth often fueled by innovation. Technically,
venture capital is a form of private equity, the latter being more interested in
mature companies. Both have potential for driving MSMEs and creating jobs
Prof Uche Uwaleke Presentation

..Pathway: Infrastructure Bonds
Infrastructure Bonds
 Use of infrastructure bonds tied to self-liquidating projects will
reduce debt burden, free up amount spent on debt service for
development purposes.
 Sukuk is a good example of an infrastructure bond
Green Bonds
 Green bonds are devoted to financing new and existing projects or
activities with positive environmental impacts such as renewable
energy, clean transportation and waste management.
Prof Uche Uwaleke Presentation

..Pathway: Social Bonds
Social Bonds
 These are issued to finance social projects or activities that achieve
positive social outcomes and/or address a social issue. In many
cases, social projects are aimed at target populations such as those
living below the poverty line, marginalized communities, migrants,
unemployed, women and/or sexual and gender minorities, people
with disabilities, and displaced persons.
 Examples of project categories eligible for social bonds include:
food security and sustainable food systems, affordable housing,
access to essential services and affordable basic infrastructure
Prof Uche Uwaleke Presentation

..Pathway: Asset Securitization
• Asset Backed Securitization is the issuance of marketable securities
backed by the expected cash flows from specific assets
• The seller of the assets called the originator sells receivables (an
asset or a flow of future receipts) to a Special Purpose Vehicle (SPV)
established to isolate the receivables.
• The SPV finances the purchase of receivables by issuing securities
to investors. Using the cash flow generated by the asset, the SPV
reimburses the investors, any residual is given back to the
originator.
• Securitization is a good way to finance viable projects
Prof Uche Uwaleke Presentation

..Pathway: Privatization
Privatization promotes Human Security.
Sale of government assets through the Stock Exchange brings
many benefits including:
 Increase in government revenue
 Reduction in wastes
 Transparency and Accountability
 Improved Corporate governance
 Enhanced service delivery
Prof Uche Uwaleke Presentation

..Pathway: Commodity Trading Ecosystem
Commodity Trading Ecosystem
The Agric and Solid minerals sector can be developed through
Commodity Exchanges.
Commodity Exchanges aid economic growth and development
via:
 Standardized and graded products
 Price discovery
 Market liquidity
 Risk-sharing
 Collection and dissemination of market information

… Pathway: Effective Regulation
• Effective capital market regulation boosts investor confidence
and makes the market more attractive to members of the
society.
 Effective regulation is enhanced by deploying technology
(Regtech) in order to be proactive
 It also entails effective education of opportunities and risks in
the capital market in order to increase participation of
members of the Society.
Prof Uche Uwaleke Presentation

Conclusion
• Human security emerged as a challenge to ideas of traditional
security which emphasize freedom from physical threats.
• Human security and the capital market are interconnected as both
ultimately seek material well being of members of a society.
• Like everything else, the achievement of human security requires
money. A capital market WOS approach is about the interaction of
public and private actors in mobilizing long term funds to tackle the
different dimensions of sustainable development – economic,
social and environmental
Prof Uche Uwaleke Presentation

Signing off- Motivational Quotes
• “Be a student as long as you still have something
to learn and this will mean all your life” – Henry Doherty
• Life has two Rules (1) Never Quit (2) Always
remember Rule 1 – Unknown author
Prof Uche Uwaleke Presentation

Prof Uche Uwaleke Presentation

References
 Adesola F. (2007) ‘’National Security, Democratization and the menace of ethnic
militia in Nigeria’’ West African Review, issue 11
 Ndanusa S. A (2018) ‘’Impact of Macroeconomic policies on economic security in
Nigeria’’ Unpublished PhD Thesis on Security and Strategic Studies
 Tadjbakhsh & Chenoy (2006), Human Security: Concepts and implications,
Routledge
 United Nations Development Programme (1994): Human Development Report
 World Bank Reports, various issues
 …………………………..
Resources
 Websites of CBN, SEC, DMO, NBS, BudIT, Budget Office, ProShareng,
GlobalEconomy, Macrotrend
Prof Uche Uwaleke Presentation