Government must promote venture capitalists through incentives, say stakeholders
Venture capitalists focus on start-ups, and invest in companies that have maximum growth potential, while private-equity firms have a broader universe of investments to choose from.
Venture capital generally comes from well-off investors, investment banks, and other financial institutions.
Stakeholders argued that venture capital is viable alternative for financing Small and Medium Enterprises (SMEs) in Nigeria, and called its promotion through tax incentives, as well as creating globally competitive tax code that would give special considerations to tax laws to attract more listings in the market.
Specifically, the Chief Research Officer, Investdata Consulting Limited, Ambrose Omodion, in a chat with The Guardian, said venture capital is imperative as SMEs have been adjudged globally as the driving force for contemporary economic growth.
He pointed out that for small and medium-sized companies that are not yet large enough to go public, working with venture capital firms can often be a good alternative to going through an initial public offering (IPO).
Citing developments in other jurisdiction, he noted that European start-ups had difficulties in growing as fast as their U.S. competitors, because European venture capital industry is smaller and less attractive for investors, while many other barriers for cross-border investments persist.
Consequently, he said European governments subsequently adopted numerous tax incentive schemes to make venture capital investments more attractive, which eventually transformed the ecosystem to become more successful in providing seed and early stage financing.
“The SMEs are the engine room of the economy. Venture capital firms help these small businesses to grow by providing capital for their expansion. When these SMEs grow, they may approach the capital market to raise more funds. Government should provide incentives to these companies to ensure bountiful harvest.
Former President, Chartered Institute of Stockbrokers (CIS), Ariyo Orishekun, also stressed the need to support venture capitalist through tax incentives to encourage more firms into the business, and eventually attract more listing in the market in the long run.
“When these companies mature, they will be able to raise larger amount of capital from the market and enable the public become part of the firms and there would be more activities in the market.”
The Chairman of NASD OTC PLC, Tola Mobulurin, at a recent forum stressed the need to make Nigerian venture capitalists more competitive.
“Venture capital should be promoted through tax incentives, as well as creating globally competitive tax code that would give special considerations to tax laws in order to attract more listings in the market.
“We must remove discriminatory tax against insurance industries. We must end some discriminatory tax regime. We should have tax code that is neutral and encouraged everybody in the same way.”
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