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Tuesday, November 17, / 05:35 PM / by SEC Nigeria / Header Image Credit: Twitter; @nsenigeria
The Securities and Exchange Commission, SEC has stated that the Federal
and State Governments have the capabilities to unlock enormous potentials
through privatisation.
Director General of the SEC, Mr. Lamido Yuguda stated this on Tuesday at
a Webinar organised by the Nigerian Stock Exchange (NSE), in collaboration with
the Nigeria Governors' Forum (NGF) and the Nigerian Investment Promotion
Council (NIPC) with the theme: Privatisation in Nigeria and the Outlook for
Subnational Economic Development.
Represented by Mr.
Reginald Karawusa Executive Commissioner Legal and Enforcement, Yuguda said the
theme speaks to one of the issues that is germane to financing for state
governments.
He said there is
indeed no better time to discuss alternative funding sources at the sub
national level given adverse impacts brought about by the COVID-19
pandemic.
According to him,
the capital market's primary role in any economy is to facilitate capital
formation. By creating a system for allocation of capital, investors are able
to price risk efficiently while issuers have the opportunity to raise funds to
finance projects. In doing so, issuers may choose to raise equities or debts.
"Sub national
issuers in Nigeria have been able to access the debt capital market over the
years since 1978, state governments in Nigeria have raised close to N900bn
through debt issuances. A significant part of these funds were deployed to
finance capital projects across the country. However, the ability of states to
continue to borrow in a sustainable manner has been severely impacted in recent
times. With the huge infrastructure gap, decreased allocation from the federal
purse owing to relatively low oil revenue and the depressed level of internally
generated revenues, states are barely able to pay salaries after servicing
their outstanding loan obligations.
"Privatisation is
an avenue for governments to unlock economic potentials inherent in government
owned enterprises. The focus on Nigeria's journey on privatisation has largely
been on the Federal Government. There have been several phases of privatisation
exercises in the past with emphasis on enterprises operating in different
sectors of the economy including oil and gas, hospitality, mining etc." Yuguda
stated.
The DG said the
discourse is crucial in the light of current economic realities as a number of
these deals were consummated through the listing of these entities on the
Nigerian Stock Exchange, some of these companies have been positively
transformed and have returned value to shareholders.
"Several
enterprises are still owned and controlled by the government, both at the state
and federal levels. A number of these entities have the capacities to generate
cash flows and corporate profitability. However, owing to certain
inefficiencies, these entities are under performing and in some cases
subtracting from value. Perhaps this is the time for state governments to
revisit the privatisation value proposition. There are several benefits to
privatisation" he stated.
He said
privatisation has numerous benefits as the proceeds from the sale of government
interest in these enterprises would help augment budget shortfalls and can be
applied towards funding critical infrastructure.
"Beyond the funds
to be generated, governments will enjoy cost of savings as there would be no
further requirements to fund these entities post-privatisation.
"There are further
benefits to be enjoyed through the taxes that would be paid in the future by
those entities. As they undergo strategic transformation and become positioned
for profitability, these entities are able to create jobs and employ residents
of their host states, facilitate infrastructure development and further
positively impact the economy in other areas" he added.
In his remarks, CEO of the Nigerian Stock Exchange, Mr. Oscar Onyema
said the NSE is pleased to hold the webinar as part of its strategic strive in
assisting the states towards economic sustenance.
Onyema said privatisation occupies a critical position in economic
globalisation and provides an avenue for raising the bar towards economic
development.
"Given COVID-19, there is no better time to re-visit privatisation and
cascade this to the subnational levels" he said.
Also speaking, the Chairman of Nigerian Governors Forum, Dr. Kayode
Fayemi said the state governments have been constrained to increase spending in
a bid to mitigate the effects of the pandemic.
According to him, "containment is fairly in place but more needs to be
done to ensure progress is not lost and that is where privatisation comes in.
If the private sector takes over in critical sectors, state governments can
focus on education and health among others".
Fayemi assured that the forum will continue to partner with the NSE to
bring in long term financing for infrastructure development.
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