The Securities and Exchange Commission (SEC) has told government at all levels that privatisation serves as a viable source of funding if harnessed properly.
The Director-General of SEC, Lamido Yuguda, gave this advice on Tuesday at a seminar organized by stakeholders.
The three stakeholders who collaborated to organize the webinar seminar are the Nigerian Stock Exchange (NSE), the Nigeria Governors Forum (NGF) and the Nigerian Investment Promotion Council (NIPC).
The theme of the seminar was: “Privatisation in Nigeria and the Outlook for Subnational Economic Development’’.
Yuguda, who was represented by Mr Reginald Karawusa, Executive Commissioner, Legal and Enforcement, SEC, noted that the purpose of the theme is to brainstorm in alternative ways in which government can have alternative source of revenue.
He added that now is the better time to iscuss alternative funding sources considering the adverse effects brought about by the COVID-19 pandemic.
“Investors are able to price risk efficiently while issuers have the opportunity to raise funds to finance projects and in doing so, issuers may choose to raise equities or debts.’’
He said that privatisation had numerous benefits as the proceeds from the sale of government’s interest in these enterprises would help augment budget shortfalls and can be applied toward 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 that “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 N900 billion 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 has 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 among others,” Yuguda said