President Muhammadu Buhari presenting the 2021 Budget to joint session of the National Assembly in Abuja on Friday, October 8, 2020.
Experts to FG: Finance N5.6trn budget deficit with capital market funds
Finance experts have urged the Federal Government of Nigeria to tap into capital market financing capacity to bridge budget deficit.
The experts noted that despite many economic headwinds, the capital market has the depth to provide the necessary financing for the development of critical infrastructure for Nigeria.
Participants at a budget seminar organised by Securities and Exchange Commission (SEC) called on the government to focus on raising bonds from the capital market as a means to financing revenue generating projects while working to reduce balance sheet borrowing.
In a communiqué issued at the end of the seminar, participants urged the Federal Government to prioritise funding of sectors such as security, education and health while creating an enabling environment for the private sector to fund sectors such as power, transportation and telecoms.
They also agreed on the need to develop an investment framework including an enabling legal and regulatory environment which represents contracts and compensates investors when necessary. They posited that the investment framework is necessary to ensure that there is a viable and attractive investment environment to attract and retain investors
According to the seminar, there is need for strategic collaboration between the public and private sectors for flexible, accessibility of funds through the capital market to finance infrastructure.
“The development of infrastructure in Nigeria has primarily been through the traditional forms of contract awards by the government, through budgetary allocation. Private sector involvement is key, and the Federal Government has identified the power and transport sectors as key for overall development. Hence prime candidates for public, private partnership (PPP).
“The success of PPP projects lies in creating an enabling environment for both private and public sectors. The public sector needs to prepare well-structured and bankable PPP to attract private investments while safeguarding public investments,” participants stated.
Lamido Yuguda, director-general, Securities and Exchange Commission (SEC), said the Nigerian has the capacity to roll out innovative products to support the country’s infrastructure needs and financing.
He noted that the 2021 budget has a deficit of N5.6 trillion with 42 per cent to be financed using domestic sources, adding that it is expected that the capital market will be leveraged to obtain the financing.