The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said the capital market is “very key” to financing Nigeria’s budget and infrastructure deficits.
Ahmed said this on Thursday during the Securities and Exchange Commission’s yearly Budget Seminar themed, ‘Financing Nigeria’s budget and infrastructure deficits through the capital market’.
She said past experiences had shown that the Nigerian capital market had been quite supportive in providing the necessary funds needed to finance the government’s needs.
According to Ahmed, the government is committed to introducing more instruments in partnership with the capital market to finance projects for economic growth.
“The capital market is a room for various programmes and mechanisms that are targeted at aggregating and channelling long term capital for businesses and development. The Nigerian capital market has been doing this for many decades and has the potentials to do more.
“I want to urge the capital market participants and operators to consider retail investments to give opportunity to the Nigerian citizens to invest within the capital market in an easy and simple way,” the finance minister said.
Ahmed stressed that the need to use the capital market for budget finance had been further underscored by the current global pandemic and its attendant negative effects on economic and social activities.
In order to provide the necessary infrastructure and still continue to meet other immediate expenditure needs, the government often adopts deficit budgets which have to be financed through borrowing, she noted.
“Nigeria needs to spend and spend now more on infrastructure and other capital projects. A recent evidence of the benefit of spending is the fourth quarter GDP growth rate of the economy which was 0.11 per cent, resulting in Nigeria pulling out of recession after two quarters of negative growth,” Ahmed added.
The Director-General of SEC, Mr Lamido Yuguda, who also spoke at the virtual event, noted that the 2021 budget proposed a deficit of N5.6trn, and that 42 per cent of the sum would be financed using domestic sources.
According to Yuguda, it is expected that the capital market would be leveraged to finance the deficit.
He said, “The 2021 Budget proposes a deficit of N5.6trn, and 42 per cent of this will be financed using domestic sources. It is expected that the capital market will be leveraged to obtain this financing and also that the impact on infrastructure development of the country as well as the general economic conditions will be positive.
“In addition, we also believe that our capital market has the capacity to roll out innovative products to support Nigeria’s infrastructure needs and financing. This is necessary for us as a country to be able to effectively compete with the rest of the world.”
Practitioners, policy makers, academics and other stakeholders also corroborated also urged the federal government to leverage the capital market to finance revenue generating projects while working to reduce balance sheet borrowing.
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