Democracy Day: Operators task FG on policies to deepen capital market

Fri, Jun 12, 2020
By publisher
4 MIN READ

Business

AS the country celebrates 21 years of unbroken democracy, the capital market operators on Friday stressed the need for the Federal Government to make the market the engine room for economic growth.

They told the News Agency of Nigeria (NAN) in Lagos that the government must embrace friendly policies to facilitate the growth and development of the capital market as an engine for economic growth.

Uche Uwaleke, a Professor of Finance and Capital Market at the Nasarawa State University, called for the removal of Value Added Tax (VAT) and stamp duties on capital market transactions which was reinstated by the government a few months ago.

“With respect to bringing down transaction costs for example, the government can help in this direction by once again removing VAT and stamp duties on capital market transactions which were reinstated some months ago,” he said.

He also called for fiscal incentives that would encourage listing of more companies on the nation’s bourse.

“The government can encourage listing by granting tax incentives to companies in priority sectors willing to list on the stock exchange as well as rewarding already listed firms through government patronage and preferential business access.

“It bears noting that listing promotes transparency and access to information, makes for corporate governance and mandates full disclosure which helps in objective compilation of data.

“Little wonder the bulk of the revenue from Companies Income Tax come from listed companies according to data from the Federal Inland Revenue Service.

“So, it is equally in the interest of the government if many companies are quoted on the stock exchange.

“The 2019 Finance Act has a number of incentives for companies, which can benefit the market either directly or indirectly.

“This could include lower tax rate of 25 per cent for small businesses which has the potential of unlocking funds for investments, creating more jobs and ultimately increased liquidity in the capital market.

“Be that as it may, this incentive can equally be extended to listed companies currently subjected to a tax rate of 30 per cent,” he said.

Similarly, Mr Adebayo Adeleke, an investor and Managing Director, Lancelot Ventures Ltd., said that Nigeria’s market was foreign portfolio investors dominated.

He noted that a sudden pull out by the foreigners would affect the market in a big way.

“The government should look at how to support and strengthen the market.

“There are signals that the big foreign markets may crash soon. The government can, as it is assisting the agricultural, health and pharmaceutical sectors, also assist to stabilise the market via a capital market stabilisation fund.

“The operators should also ensure market integrity and seek collective survival of the market,” he stated.

Adeleke called for a creation a special intervention fund tagged capital market stabilisation fund by the government to allow Nigerian investors mop up such foreign investors’ interest so as to stabilise the market.

“It will also empower Nigerians to own (or increase their ownership) and benefit from the market.

“Such market stabilisation fund can be at five percent interest rate for a period of about three years (medium term).

“It may be disbursed to Nigerian investors with Central Securities Clearing Deposit account and active in the market for not less than last five  years or so..,” he said.

Also, Mr Ambrose Omordion, Chief Operating Officer, InvestData Ltd., said the nation’s capital market had underperformed in the last couple of years.

Omordion said government and regulators before now depended on foreign investors to provide liquidity for the market, thereby making the stock market volatile and unstable for Nigerians to plan their investment or save through the market.

“When these foreign investors are entering, the market prices move up and when there is any slight challenge in the system, they will exit the market thereby obstructing prices and confidence.

“To balance this and reduce price oscillation on the exchange, the new substantive director-general of the Securities and Exchange Commission should further deepen the market by attracting more participants,” Omordion said.

He also called for effective corporate governance that promote good relationship with directors, management and shareholders to boost confidence. (NAN)

– Jun. 12, 2020 @ 16:55 GMT |

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