SEC Advises State Govts On Developmental Projects To Boost IGR
The Securities and Exchange Commission has advised state governments to establish companies for specific projects to boost their Internally Generated Revenue.
The acting Director-General, SEC, Ms Mary Uduk, gave the advice while speaking at the Federation Account Allocation Committee 2020 Retreat, with the theme, ‘Efficient federation revenue allocation as a nexus for national economic diversification,’ in Lagos.
She said there was an urgent need for state governments to increase their IGR to enable them to meet their financial obligations and carry out developmental projects.
She said, “States could further explore the establishment of project companies for specific target projects such as sugar cane factory, a 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 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 which foreign investors require.”
The SEC boss said the capital market had been associated with the development of critical legacy projects across the country, which she said included the development of Kaduna Ginger Factory, Ogba Riverside Housing Estate in Edo and Lekki Peninsula in Lagos.
According to her, borrowing from the capital market is cheaper for states than conventional banks, which have higher interest rates and lesser repayment periods.
Uduk said some state governments, however, shunned the capital market in financing their projects due to the rigorous conditions put in place by SEC for obtaining and utilising the loans.
She 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.
Several state governments have in the past issued sub-national bonds to finance infrastructure projects. The Federal Government also channeled some of the proceeds of its general bond issuance towards financing infrastructure.