The Securities and Exchange Commission (SEC) has reaffirmed its commitment to enhancing the regulatory framework for borrowing by both governments and corporations, emphasizing its critical role in Nigeria’s financial system.
In an interview, the Director General of the SEC Emomotimi Agama, highlighted the importance of this initiative, stating that borrowing is a central element of the financial system. He emphasized that ensuring sustainability in government and corporate borrowing is essential for driving development and economic growth, particularly following a Supreme Court ruling that directs 774 local government areas to receive direct subventions from the Federal Government. This ruling makes it even more crucial for effective management of borrowing and financial resources at both the government and local levels.
Agama noted: “Improving the framework for borrowing is very important because borrowing is part of the financial system and we can only make much of the move we want to make if there is enough funding. Hence, we want to be sure of sustainability in both government borrowing, municipal and state governments.”
Corporate Borrowing and Central Counterparties (CCPs)
On the corporate front, the SEC is also introducing new rules on Central Counterparties (CCPs), which will play a pivotal role in capital raising by Nigerian companies. These rules, which are set to become operational in 2025, aim to make borrowing a more seamless and effortless process for businesses.
Agama explained: “As a Commission, we have established those new rules and they are going to be functional in 2025. We want to make borrowing a seamless and effortless process for Nigerian companies.”
Expanding Market Opportunities and Introducing Derivatives
A significant aspect of the SEC’s plans for 2025 is the introduction of derivatives into the Nigerian capital market. Historically, Nigeria’s capital market has been perceived as a mono-product market, but the SEC aims to change this by introducing new financial products and opportunities. Agama emphasized that such initiatives are impossible without appropriate laws and regulations to guide them.
To foster confidence in derivatives trading, the SEC plans to exempt these transactions from general insolvency laws, thereby creating a safer and more predictable trading environment.
Agama stated: “To build confidence in derivatives trading, we hope to provide a clear direction of these transactions… We aim to provide a clear exemption of these transactions from general insolvency laws, creating a safer and more predictable trading environment.”
Building Confidence and Attracting More Market Participants
By improving regulatory standards and introducing innovative financial products, the SEC hopes to build confidence in the market and attract more players. This approach is designed to ensure a more robust and dynamic capital market that supports both government and corporate financial activities.
In summary, the SEC is committed to making Nigeria’s financial system more efficient, transparent, and inclusive by improving the regulatory framework for borrowing and capital raising, alongside introducing new products like derivatives to the market.
