SEC Begins Stakeholders’ Engagement To Reintroduce Tax Waivers

The Director General of Securities and Exchange Commission (SEC), Mr Lamido Yuguda, on Thursday said the commission has commenced necessary engagements with relevant stakeholders to ensure that tax waivers in the debt capital market is re-introduced.

Speaking during the virtual first quarter Capital Market Committee, the DG explained that the sunset of tax waiver could potentially distort future capital inflows into the country with the likely pressure on foreign exchange, which is not in the interest of the economy as a whole.

According to him, until recently, transaction fees were non-existent or negligible in the debt capital market, while the cost of regulation was relatively the same as in other instruments and markets, stressing that the fact that tax advantage gave the market some support, allowing it to grow.

He explained further that, “This support was largely financed by fees from other segments of the Capital Market. We believe that the debt capital market has grown tremendously and is mature enough to contribute to the cost of regulating the Nigerian capital market, ensuring it remains safe and fair to all participants.

“As such, the Commission introduced a regulatory fee structure on secondary market transactions in debt instruments, which took effect from January 1, 2022.

“Another recent development in the debt market that has generated concern is the sunset on the Federal Government of Nigeria 2011 Companies Income Tax (Exemption of Bonds and Short-term Government Securities) Exemption Order.

“The exemption incentivized issuance and investment in bonds. This exemption expired on January 2, 2022.

“The expiration of this Exemption Order has several implications, including imposition of heavier burden on investors. It also increases crowding out of the corporate bond market, given that the waiver continues on FGN securities.

“There are therefore calls to not only sustain, but perpetuate these waivers.”

He noted that the Commission would continue to enhance the existing regulatory framework guiding the operations of the market by keeping pace with the evolving changes in market practices, especially with the advent of Financial Technology which has significantly altered the ways and means of transacting business in the capital market.

The Financial System Strategy 2020 (FSS2020) was charged with the responsibility of developing a Competency Framework for the Financial System. At its 79th meeting, the Financial Services Regulation Coordinating Committee (FSRCC) approved the Financial System Competency Framework and recommended its implementation.