SEC seeks tax exemption on corporate bonds to boost market liquidity

•To unveil revised capital market master plan next month

The Securities and Exchange Commission (SEC) has urged the Federal Government to consider its proposal to exempt corporate bonds from the payment of tax.

The Director-General of SEC, Lamido Yuguda stated this at the weekend during a media parley on the outcome of the second capital market committee meeting for the year, 2022.

The Federal Government had in 2012, exempted bonds and short-term government securities from income tax for 10 years, which recently expired on January 1, 2022.

Speaking on the tax on corporate bonds, the SEC DG said the decision to seek tax exemption would help to unlock the attractiveness of the corporate bond market.

He said, “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.

“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 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.

Yuguda assured that despite the harsh operating environment, the Commission would 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.