By Kayode Tokede
The Federal Government has been urged to focus on raising bonds from the capital market as a means to financing revenue generating projects while working to reduce balance sheet borrowing.
These, among others, were part of the resolutions reached at the Securities and Exchange Commission’s yearly Budget Seminar with the theme, “Financing Nigeria’s Budget and Infrastructure Deficits through the Capital Market,” held virtually on Thursday.
Participants at the Seminar agreed that the government remains an enabler to creating the conducive enabling environment for policies, security and good leadership that will 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 an investment framework including an enabling legal and regulatory environment which represents contracts and compensates investors when necessary. This, they posited, is to ensure that there is a viable and attractive investment environment to attract and retain investors.
“There is need for strategic collaboration between the public and private sectors for flexible, accessibility of funds through the capital market to finance infrastructure.
“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 key, and the Federal Government has identified the power and transport sectors as key for overall development. Hence, prime candidates for Public, Private Partnership.
“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 to attract private investments while safeguarding public investments,” they added.
In her remarks, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, Minister said the capital market is very key.
“Past experiences have shown that the Nigerian capital market has been quite supportive in providing the necessary funds needed to finance government’s needs.”
Ahmed said the capital market therefore serves as an important channel through which government budget deficits and the economic infrastructure deficits can be financed and government is committed to introducing more of these instruments in partnership with the capital market to finance projects for economic growth.
“The capital market is a 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 give opportunity to the Nigerian citizens to invest within the capital market in an easy and simple way.
She described the theme as apt given the urgency to raise infrastructure that are required for creating enabling environment, in which businesses and citizens of the country can thrive.
“This need is further underscored by the current global pandemic with its attendant negative effects on our daily economic and social activities. In order to provide the necessary infrastructure and still continue to meet other immediate expenditure needs, 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. A recent evidence of the benefit of spending is the fourth quarter GDP growth rate of the economy 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 is an improvement over most of the countries within our comparative groups.”
In a welcome address, Director General of the SEC, Mr. Lamido Yuguda stated that the 2021 Budget proposes a deficit of N5.6trn, and 42% of this will be financed using domestic sources, adding that it is expected that the capital market will be leveraged to obtain this financing and also that the impact on infrastructure development of the country as well as the general economic conditions will be positive.
According to him, “The 2021 Budget proposes a deficit of N5.6 trillion, and 42% of this will be financed using domestic sources. It is expected that the capital market will be leveraged to obtain this financing and also that the impact on infrastructure development of the country as well as the general economic conditions will be positive.
“In addition, we also believe that our capital market has the capacity to roll out innovative products to support Nigeria’s infrastructure needs and financing. This is necessary for us as a country to be able to effectively compete with the rest of the world.”
In addition, Lamido expressed the belief that the capital market has the capacity to roll out innovative products to support Nigeria’s infrastructure needs and financing. This is necessary for us as a country to be able to effectively compete with the rest of the world.
He stated that “It is against this backdrop that the SEC has invited practitioners, policy makers and academics to analyse and discuss how the capital market can be leveraged to finance Nigeria’s budget and infrastructure deficits, drawing relevant policy lessons from successful jurisdictions.
“In the past four editions of this Seminar, participants have benefited greatly from the insights provided by our speakers, guests and panellists. Usually, the communiqué from this meeting would be circulated to relevant public and private sector stakeholders as inputs into the national discourse on fiscal policy,” he added.