SEC Urges FG to Exempt Corporate Bonds from Tax

By Aduragbemi Omiyale

The federal government has been urged to consider another tax holiday for corporate bonds in order to boost liquidity in the Nigerian capital market.

Recall that in 2012, the central government exempted bonds and short-term government securities from income tax for 10 years, which recently expired on January 1, 2022.

At the moment, only government securities are tax-free as investments in debt instruments issued by corporate organisations attract tax payments.

But the Securities and Exchange Commission (SEC) is asking the government to again exempt corporate bonds from tax payment to unlock the attractiveness of the corporate bond market.

Speaking over the weekend after the second Capital Market Committee (CMC) meeting for this year, the Director-General of SEC, Mr Lamido Yuguda, said this move would encourage more companies to approach the capital market for their funding needs.

“The Nigerian capital market community held its second Capital Market Committee (CMC) Meeting for the year on Thursday, August 18, 2022. The meeting was well attended by over 300 capital market operators and we had very robust deliberations.

“We observed that the world is facing high inflation and low growth. Consequently, the World Bank, the International Monetary Fund and other Economic forecasters are trimming down growth estimates with forecasts reflecting sizable downgrades to the outlook for the rest of the year and 2023.

“The commission continues its engagement with the Minister of Finance, Budget and National Planning on the request for tax exemption for corporate bonds,” he said.

He added, “For any asset class, the investment is a function of many considerations. Tax is just one of those considerations. Although it is only one, it is an important consideration especially when the tax rate is high.

“So, I think for now, given that there are so many considerations, and considering all these factors, we feel the tax rebate should be reinstated and we have been working with the tax and fiscal authorities to advocate the return to the status quo.”

The SEC DG also said that the revised Capital Market Masterplan would be launched by November following its approval by the federal government.

The Capital Market Master Plan Implementation Council had in June this year submitted the revised Nigerian Capital Market Master Plan (2021 -2025) to the Minister of Finance, Budget and National Planning.

Mr Yuguda assured that despite the harsh operating environment, the commission will continue to strive and fulfil its mandate of protecting investors and creating an enabling environment for market operations.

The SEC boss urged all stakeholders to continue to work towards reducing the volume of unclaimed dividends and reiterated that stiff penalties will be meted out to any stakeholder whose action appears to frustrate the efforts of the Commission on this objective.

He lamented that despite the commission’s efforts in the implementation of the Electronic Dividend Mandate Management System, investors have continued to lament the delayed payments of e-dividend and the cumbersome manual process among other shortcomings.

“A large number of investors are also still unaware of the eDMMS and have not mandated their accounts. The commission will, however, continue to create awareness in this regard.

“Capital market operators must also do more to demonstrate, through their activities, an efficient capital market that prioritizes the interests of investors,” he added.

As part of its efforts to stem the tide of fraudulent activities of unregistered investment crowdfunding platforms, the SEC DG at the briefing warned operators of such platforms that they stand the risk of being prosecuted.

He said, “The commission has an existing regulatory framework that permits private companies with the required structure and mechanism to raise capital from the public through crowdfunding. All crowdfunding platforms must register with the agency.