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Updated: How 2020 budget, Finance Act can grow capital market – Experts

Stakeholders in the Nigeria capital market were in Lagos, the nation’s largest city, on Thursday to discuss how they could leverage the 2020 budget and the Finance Act for the growth of the Nigerian capital market.

The budget seminar, themed “Leveraging the 2020 Budget and The Finance Act for the Growth of the Nigerian Capital Market”, is the fourth in its series organised by the Securities and Exchange Commission (SEC).

The SEC regulates the capital market and has a mandate to protect investors in the market.

Discussants included a group of market practitioners, academia, and policymakers who analysed this year’s budget and the Finance Act with the aim of increasing stakeholders’ knowledge and contributions, while identifying areas of benefit.

Over the years, the SEC Budget Seminar Series has served as a forum for evaluating the connection between the Nigerian capital market and the annual Federal Government budget, with the aim of identifying how the capital market can contribute to, and benefit from, the budget and its implementation.

President Muhammadu Buhari presented the 2020 budget to the National Assembly on October 8, 2019 which was eventually signed on December 17, 2019, with an approved budget of N10.6 trillion.

Budgets play important roles in an economy, and by extension in the capital market. This importance is actually the basis on which the market stakeholders came together for the seminar and analysed the risks and opportunities presented by the government budget.

“The last 12 months has been a challenging and difficult period for our economy, the markets and by extension the SEC,” said Mary Uduk, acting director-general, SEC.

“Despite revenue challenges and competing demands, SEC successfully implemented key programmes and projects, achieving milestones. The SEC is poised to build on the gains of 2019 with renewed focus on resource optimisation and execution of prioritised initiatives in the coming year,” she said.

Discussants also looked at critical aspects of the new Finance Act that affect the capital market. These include the provisions on Securities Lending, Real Estate Investment Schemes, minimum tax, increased Value Added Tax, amongst others.

“This is not time for apathy but time for vigorous and positive actions,” said Suleyman Ndanusa, a former DG of SEC who also served as chairman of Board of SEC.

“The annual budget cycle is important particularly in countries like Nigeria where government expenditure has significant impact on the economy,” Ndanusa said. “The budget sets the tone for the direction of the economy each year which presents opportunities and risks.”

He said given the pressing need to grow the capital market and the important role played in the economy by the government through its fiscal and other policies, the topics selected for discussion were excellent.

“Looking at some broad items of the 2020 budget; the total expenditure amounts to N10.6 trillion, which is a 19 percent increase on that of 2019, but just about 6.5 percent of the nation’s GDP. The budget is split into 79 percent for recurrent expenditure and 21 percent for capital expenditure with a deficit of around N2 trillion,” Ndanusa stated.

“How this deficit would be funded is always of interest to the capital market community; coupled with the implications of the choice of funding. There are the usual questions on whether we are returning to a period of high treasury yields and the consequent crowding out of corporates from the debt markets as well as the tradeoff between investments in fixed income and equities segments of the capital market,” he said.

Afolabi Olowokere, head, economic research and policy management division at SEC, in his keynote presentation took participants through on the theme of the 2020 budget seminar.

“Pro-capital market measures should be introduced into the government’s budget and policies. Policies that improve access to capital for small and medium scale enterprises are necessary for growth and development. Increased allocation to the health and education sectors is equally necessary,” he said.

Olowokere wants government to effect policies that encourage more companies to list on the exchanges “as such companies are more transparent, better governed and easier to administer taxes”.

“The government should abide by the constitution for the budget to be implemented from January to December. The government should consider securitising some of its assets to turn illiquid assets liquid. Infrastructure development is important for sustainable development. The capital market can participate in the housing sector through securitisation,” he said.

The economist reckons that there is “great potential for Pension Fund Administrators (PFAs) to invest in the real estate sector”.

“Public-Private Partnership should be encouraged for infrastructure development. State governments should be encouraged to raise capital for developmental projects from the Capital market,” he said.



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