The Acting Director-General of the Securities and Exchange Commission Nigeria (SEC), Ms. Mary Uduk, on Tuesday, joined her voice to calls on governments of the 36 states to boost their Internally Generated Revenue (IGR), thereby reducing dependence on the monthly hand-outs from the Federation Account Allocation Committee (FAAC).
Speaking at the ongoing FAAC 2020 Retreat with the theme: “Efficient Federation Revenue Allocation as a Nexus for National Economic Diversification” in Lagos, she said one way of achieving this is for state governments to establish companies for specific target projects.
According to a statement by Efe Ebelo, Head, Corporate Communication, of the commission, the acting SEC boss noted the urgent need for state governments to increase their IGR to meet their financial obligations to people and carry out developmental projects.
Such project companies for specific target projects, she noted, include sugar cane factory, cocoa processing factory or other projects with income and export potential which have the ability to generate revenue.
“These companies, if set up as public companies with private sector participation, albeit with a majority of the shares owned by the state, can issue its securities to the public. This is to raise capital on an ongoing basis to meet the working capital needs of the companies. Being set up as a public company confers the transparency and corporate governance standards that foreign investors require.”
The capital market, Uduk continued, has been associated with the development of critical legacy projects across the country including the development of the Kaduna Ginger Factory, Ogba Riverside Housing Estate in Edo, as well as the Lekki Peninsula in Lagos.
She stated that borrowing from the capital market is cheaper for states than conventional banks which have higher interest rates and lesser repayment periods.
The Acting DG said some state governments, however, shun the capital market in financing their projects due to the rigorous conditions put in place by SEC for obtaining and utilising the loans.
Uduk said during verification by SEC, some of the projects for which the loans were sought were discovered to be none existent, while others already existed before the applications were made.
Recall that over the years, several state governments have issued sub-national bonds to finance infrastructure projects, just as the Federal Government also channels the proceeds of its general bond issuance towards financing infrastructure.