he Acting Director General of the Securities and Exchange Commission Nigeria (SEC), Ms Mary Uduk, has advised state governments to establish companies for specific target projects to boost their internally generated revenue (IGR).
Uduk gave the advice yesterday while speaking at the ongoing Federation Account Allocation Committee (FAAC) 2020 Retreat in Lagos.
The retreat is themed: “Efficient Federation Revenue Allocation as a Nexus for National Economic Diversification.”
She said there was urgent need for state governments to increase their IGR to enable them meet their financial obligations to people and carry out developmental projects.
According to her, “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 acting DG said the capital market had been associated with the development of critical legacy projects across the country, which she said includes development of the Kaduna Ginger Factory, Ogba Riverside Housing Estate in Edo as well as the Lekki Peninsula in Lagos.
She stated that borrowing from the capital market was cheaper for states than conventional banks, which have higher interest rates and lesser repayment periods.
The acting DG 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.
Uduk 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.
Recall that over the years, several state governments had issued sub-national bonds to finance infrastructure projects. The Federal Government of Nigeria (FGN) also channels some of the proceeds of its general bond issuance towards financing infrastructure.