Thursday, March 11, 2021
/ 9:18PM / SEC Nigeria / Header Image Credit: SEC Nigeria
The Federal Government has been urged to focus on raising bonds from the capital market as a means of financing revenue-generating projects while working to reduce balance sheet borrowing.
These among other recommendations were part of the resolutions that were expressed at the Securities and Exchange Commission's (SEC's) yearly Budget Seminar with the theme "Financing Nigeria's Budget and Infrastructure Deficits through the Capital Market" held virtually.
Participants at the Seminar agreed that the government remains an enabler to creating a conducive environment for policies, security and good leadership that would ultimately support business growth and development. They, therefore, urged the Federal Government to prioritise funding of sectors such as security, education and health while creating an enabling environment for the private sector to fund sectors such as power, transportation, and telecoms.
They also agreed on the need to develop a favourable investment framework including an enabling legal and regulatory environment that upholds contracts and compensates aggrieved investors when necessary.
"There is a need for strategic collaboration between the public and private sectors for flexible access to funds through the capital market."
"The development of infrastructure in Nigeria has primarily been through the traditional forms of contract awards by the government, through budgetary allocation. Private sector involvement is important, and the Federal Government has identified the power and transport sectors as crucial to development. Hence making them prime candidates for Public, Private Partnership (PPP)."
"The success of PPP projects lies in creating an enabling environment for both private and public sectors. The public sector needs to prepare well-structured and bankable PPP projects to attract private investments while safeguarding public investments" they added.
In her remarks, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the capital market was very pivotal to development. She noted that past experiences had shown that the Nigerian capital market had been supportive in providing funds needed to finance the government's projects.
Ahmed said the capital market, served as an important channel through which the government's budget and infrastructure deficits could be financed.
"The capital market has room for various programmes and mechanisms that are targeted at aggregating and channelling long-term capital for businesses and development. The Nigerian capital market has been doing this for many decades and has the potentials to do more. I want to urge the capital market participants and operators to consider retail investments to allow Nigerian citizens to invest within the capital market easily".
She described the theme of the seminar as apt given the urgency to raise infrastructure that was required for creating the environment in which businesses and citizens could thrive.
"This need is further underscored by the current global pandemic with its attendant negative effects on our daily economic and social activities. To provide the necessary infrastructure and continue to meet other immediate expenditure needs, the government often adopts deficit budgets which have to be financed through borrowing".
"Nigeria needs to spend and spend now more on infrastructure and other capital projects. Recent evidence of the benefit of spending is the Q4 GDP growth rate which was 0.11% resulting in Nigeria pulling out of recession after two quarters of negative growth. This annual growth rate that was initially projected at -3.2% closed the year at -1.92% which was an improvement over most of the countries within our peer group".
In a welcome address, the Director-General of the SEC, Mr. Lamido Yuguda, said that the 2021 Budget proposed a deficit of N5.6trn, and 42% of this would be financed using domestic sources, adding that it was expected that the capital market would be approached for this financing.
According to him, "The 2021 Budget proposed a deficit of N5.6trn, and 42% of this would be financed using domestic sources. It was expected that the capital market would be approached to obtain this financing.
"Also, we believe that our capital market could roll out innovative products to support Nigeria's infrastructure financing needs. This was necessary to enable us take on the rest of the world".
He said that it was against this backdrop that the SEC had invited practitioners, policymakers and academics to analyse and discuss how the capital market could be used to finance Nigeria's budget and infrastructure deficits, drawing relevant policy lessons from successful jurisdictions.
"In the past four (4) editions of this Seminar, participants have benefited greatly from the insights provided by our speakers, guests and panellists. Usually, the communiquÃ© from this meeting would be circulated to relevant public and private sector stakeholders as inputs into the national discourse on fiscal policy" he added.