SEC plans framework for sustainable government borrowing

The Securities and Exchange Commission has announced plans to enhance the regulatory framework for borrowing by governments and corporates, emphasising sustainability and efficiency in the financial system.

According to a statement on Wednesday, the Director-General of the Commission, Dr Emomotimi Agama, made this known during a recent interview, highlighting the importance of borrowing in driving development across various sectors of the economy.

He noted that the SEC is particularly focused on ensuring sustainability in government borrowing, including at municipal and state levels, in light of the Supreme Court’s directive mandating direct subventions to the 774 local government areas from the Federal Government.

The SEC DG said, “Improving the framework for borrowing is very important because borrowing is part of the financial system and we can only make much of the move we want to make if there is enough funding.

“Hence, we want to be sure of sustainability in both government borrowing, municipal and state governments particularly with the new Supreme Court order regarding the 774 local government areas receiving direct subvention from the Federal Government.

“It therefore becomes important that we have in the management of such resources via strategic and focused borrowing to help the developments in those sectors.”

On the corporate side, Agama highlighted the introduction of new rules for Central Counter Parties as a pivotal step in transforming Nigeria’s borrowing landscape.

According to him, the new rules, set to take effect in 2025, aim to simplify and streamline borrowing for Nigerian companies while fostering growth in the capital market.

“As a Commission we have established those new rules and they are going to be functional in 2025. We want to make borrowing a seamless and effortless process for Nigerian companies.

“It is very important that as we drive the growth of the Nigerian capital market, we also drive new products and new opportunities for every Nigerian.

“Nigeria for a long time has been seen as a mono product market, but the Year 2025 will be different because we will continue to drive the process of introducing derivatives into the capital market.,” he noted in the statement.

Agama emphasised the importance of legal and regulatory measures in building confidence in derivatives trading and creating a predictable environment for transactions.

He explained that the SEC’s framework would ensure these transactions are exempt from general insolvency laws, providing a safer platform for market participants.

The SEC’s initiatives are expected to strengthen Nigeria’s financial system, enhance market confidence, and support broader economic development.