The Securities and Exchange Commission Nigeria (SEC) has advised state governments to establish companies for specific target projects in order to boost their Internally Generated Revenue (IGR).
Ms Mary Uduk, Acting Director-General, SEC, gave the advice while speaking at the ongoing Federation Account Allocation Committee (FAAC) 2020 Retreat in Lagos.
The theme of the retreat is “Efficient Federation Revenue Allocation as a Nexus for National Economic Diversification”.
Uduk said there was urgent need for state governments to increase their IGR to enable them to meet their financial obligations to people and carry out developmental projects.
“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,” she said.
Uduk said the Capital Market had been associated with the development of critical legacy projects across the country.
She said that they include development of the Kaduna Ginger Factory, Ogba Riverside Housing Estate in Edo as well as the Lekki Peninsula in Lagos.
According to her, borrowing from the capital market is cheaper for states than conventional banks which have higher interest rates and lesser repayment periods.
She said some state governments, however, shun 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.