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SEC plans to boost borrowing framework for governments and company entities

The Securities and Alternate Fee (SEC) has introduced plans to strengthen the regulatory framework for borrowing by governments and company entities in Nigeria.

SEC’s Director-Basic, Dr. Emomotimi Agama, disclosed this in an announcement issued on Wednesday in Lagos, highlighting the significance of borrowing within the monetary system and the necessity for strategic useful resource administration.

Dr. Agama defined that the latest Supreme Courtroom order mandating direct funds switch from the Federal Authorities to the 774 Native Authorities Areas influenced the necessity for a extra sturdy borrowing framework.

Bettering the framework for borrowing is essential as a result of borrowing is an integral a part of the monetary system. We are able to solely obtain the progress we purpose for if there may be sufficient funding. 

 Therefore, we wish to make certain of sustainability in each authorities borrowing: municipal and state governments. It’s due to this fact vital that we handle such sources, by way of strategic and targeted borrowing to assist the developments in these sectors,” he mentioned.

New guidelines for company borrowing 

On company borrowing, Dr. Agama revealed that the fee is altering the panorama with the brand new guidelines on Central Counter Events (CCPs) to reshape the capital market panorama.

“We wish to make borrowing a seamless and easy course of for Nigerian corporations. It is rather vital that as we drive the expansion of the Nigerian capital market, we may even drive new merchandise and new alternatives for each Nigerian,” he mentioned.

The principles, which can take impact in 2025, are designed to assist corporates elevate capital whereas diversifying Nigeria’s monetary market.

Agama famous that the introduction of CCPs would mark a major shift in how capital is raised and managed.

Plans to introduce derivatives 

Dr. Agama additionally emphasised the fee’s give attention to introducing derivatives into the Nigerian capital market, describing it as a essential step for market diversification.

“2025 could be totally different, as SEC would proceed driving the introduction of derivatives into the capital market,” he mentioned.

Derivatives are monetary devices whose worth is derived from an underlying asset, equivalent to shares, commodities, currencies, or rates of interest. They’re generally utilized by traders to handle dangers, speculate on market actions, or achieve publicity to particular property with out proudly owning them straight.

Nevertheless, he acknowledged that reaching this objective would require enabling legal guidelines and rules.

“To foster confidence in derivatives buying and selling, we’re offering a transparent framework for these transactions. This consists of exempting such transactions from normal insolvency legal guidelines, thereby making a safer and extra predictable buying and selling atmosphere,” he added.

Dr. Agama said that SEC’s efforts are geared toward making a safer buying and selling atmosphere to construct confidence and entice extra contributors to the market.

“The fee is making a safer buying and selling atmosphere, constructing confidence and attracting extra gamers to the market, therefore it should present enabling rules and legal guidelines,” he mentioned.

What you must know 

In July 2024, the Supreme Courtroom issued an order mandating direct subvention from the Federal Authorities to the 774 Native Authorities Areas in Nigeria.

  • The courtroom’s resolution mandates that funds allotted to the 774 Native Authorities Areas (LGAs) bypass state governments and go on to the democratically elected native authorities administrations.
  • This resolution is to handle the long-standing situation of state governors mismanaging native authorities funds and ensures that LGAs can function independently, with their share of income straight allotted to them.
  • This alteration in monetary management signifies that LGAs will now be chargeable for managing their very own funds, which can require borrowing to finance improvement initiatives.
  • With this shift in monetary management, there’s a heightened give attention to making certain that borrowing by each authorities entities (municipal and state) and corporates is sustainable and strategically managed.

This aligns with SEC’s objective to enhance the regulatory framework for borrowing, serving to to successfully make the most of and handle sources for improvement.


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