Key stakeholders in the nation’s fiscal system and investment space on Thursday advised the Federal Government to focus on raising bonds from the capital market as a means to financing revenue generating projects while working to reduce balance sheet borrowing.
The advice was among other key resolutions reached at the Securities and Exchange Commission’s yearly Budget Seminar held virtually with the theme ‘Financing Nigeria’s Budget and Infrastructure Deficits through the Capital Market’.
Participants at the Seminar agreed that the government remained an enabler in creating the conducive enabling environment for policies, security and good leadership that will ultimately support business growth and development.
They, therefore, urged the 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.
In addition, the experts 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, to ensure that there is a viable and attractive investment environment to attract and retain investors
The resolutions stated, inter alia,: “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” the experts added.
In her remarks, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, 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 remained 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 minister explained: “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 added.
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 his welcome address, Director General of the SEC, Mr. Lamido Yuguda, pointed out 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.
Yuguda further said that the SEC board and management believed that the nation’s 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 explained that it was against this backdrop that the SEC 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.
The DG recalled that in the past four editions of this Seminar, participants had benefited greatly from the insights provided by speakers, guests and panelists and that as usual, the communiqué from the meeting would be circulated to relevant public and private sector stakeholders as inputs into the national discourse on fiscal policy.