How the Capital Market can Support FGN in Financing 2021 Budget Deficit

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Wednesday, February 10, 2021 / 12:47PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: TVC News


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As the Nigerian Federal Government grapples with a budget deficit of over N5trn, Professor Uche Uwaleke, an economics lecturer at the Nasarawa State University, Keffi, Abuja, believes the country's capital market could be used to plug budgetary holes. Uwaleke was one of the speakers at the Chartered Institute of Stockbrokers (CIS) 2020 economic review, and 2021 economic outlook.

 

Speaking on "Financing the FGN's N5trn Budget Deficit in 2021" Uwaleke identified three ways the capital market could be used to address the problem:

  • FGN Infrastructure/Revenue Bonds tied to projects
  • Securitization
  • Privatization

 

Providing insight into the FGN Infrastructure/Revenue bonds, he cited the September 2020 report of the Debt Management Office (DMO) revealing that the capital market has played a critical role in financing the government.

 

He advised the government to ensure that the proceeds are ring-fenced, instead of general obligations bonds that proceeds often go into recurrent expenditure.

 

In the area of Securitization, he described the example of how Malaysia has used it to expand its airport infrastructure to global standards.

 

"Special Purpose Vehicles can be set-up to raise funds from the capital market via securities issued to investors, through securitizing receivables in infrastructure, real estate amongst others," He said.

 

On privatization, he said the sale of selected government enterprises/assets such as the Nigerian National Petroleum Corporation, NNPC through the stock exchange.

 

"If the government can list at least 10% of the NNPC on the stock exchange, it can generate about $5bn revenue as proceeds to improve its revenue" he added.


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