The Securities and Exchange Commission (SEC) focuses on improving the regulatory framework for borrowing by governments and corporate organizations in Nigeria.
The Director-General of SEC, Dr. Emomotimi Agama, underscores the importance of borrowing in driving economic development and ensuring sustainable resource management. Speaking in Lagos on Wednesday, he highlights the need for a more structured borrowing system, influenced by a Supreme Court directive requiring direct fund transfers to Nigeria’s 774 Local Government Areas (LGAs).
Dr. Agama explains that borrowing is a critical component of the financial system and a key driver of progress.
“Strengthening the framework for borrowing is essential to ensure sustainability. Responsible borrowing practices by municipal and state governments are necessary for effective resource management and sectoral development,” he states.
On corporate borrowing, SEC is introducing new rules to simplify and enhance access to funding for Nigerian companies. Dr. Agama reveals that the commission is implementing Central Counter Parties (CCPs) to reshape the capital market and create more opportunities for businesses.
“The new rules, effective from 2025, are designed to make borrowing seamless for companies while driving growth and innovation in Nigeria’s financial market,” he explains.
The introduction of CCPs marks a significant transformation in how capital is raised and managed, offering businesses a more efficient way to access funds.
SEC also prioritizes the introduction of derivatives to diversify the Nigerian capital market. Dr. Agama describes this move as a critical step toward modernizing the market and improving risk management tools for investors.
“2025 will bring a new dimension to the capital market with the introduction of derivatives, expanding opportunities for investors and businesses,” he notes.
Derivatives, financial instruments linked to underlying assets like stocks, commodities, or currencies, provide investors with options for managing risk and speculating on market trends.
To build trust in derivatives trading, SEC establishes a clear regulatory framework and exempts such transactions from general insolvency laws, ensuring a safer trading environment.
In July 2024, the Supreme Court mandates direct fund allocations from the Federal Government to LGAs, bypassing state governments. This decision aims to empower LGAs to manage their finances independently and address long-standing concerns over fund mismanagement.
With this change, LGAs may explore borrowing to fund development projects, further emphasizing the need for a structured and sustainable borrowing framework.
SEC’s ongoing initiatives aim to:
- Promote responsible borrowing practices for governments and corporate entities.
- Diversify financial instruments through innovations like derivatives.
- Build investor confidence by establishing clear regulatory guidelines and legal protections.
Through these efforts, SEC is creating a robust, secure, and inclusive financial market that supports Nigeria’s economic growth and development.
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