SEC Strengthens Regulatory Framework for Government, Corporate Borrowing
The Securities and Exchange Commission (SEC) has announced plans to enhance its regulatory framework concerning borrowing by both government and corporate entities, focusing on ensuring financial sustainability, particularly in key sectors.
This move comes in response to a Supreme Court ruling that mandates direct subventions from the federal government to all 774 local government areas. The SEC aims to ensure that borrowing remains sustainable, both for governments at various levels and for corporate entities, thus supporting the broader economy.
In a statement, SEC Director-General Emomotimi Agama emphasized the vital role that borrowing plays in the financial system. He underscored that improving borrowing practices is crucial for securing the necessary funding to drive economic growth. Agama highlighted that sustainable borrowing, particularly at the municipal and state government levels, is critical, especially in light of the Supreme Court ruling regarding direct subventions to local governments as this initiative aims to ensure that local governments can access funding while maintaining fiscal responsibility.
For corporate borrowers, the SEC is preparing to introduce new regulations for Central Counterparties (CCPs), designed to streamline the borrowing process and make capital raising more efficient for Nigerian companies. These regulations, expected to take effect later in 2025, are part of a broader strategy to enhance the corporate borrowing landscape in the country. The SEC is working to make the borrowing process more seamless, which will allow businesses to access capital more effectively and contribute to economic growth.
The SEC is also focusing on diversifying the Nigerian capital market by introducing derivatives, creating new investment opportunities. These changes will be backed by laws and regulations aimed at building market confidence and ensuring a secure, predictable trading environment. As part of this effort, the SEC plans to provide exemptions for derivatives transactions from general insolvency laws, which will encourage market growth and support investor confidence in the Nigerian financial market.
