Exempt tax on corporate bonds to attract market investors, SEC tells FG

The Securities and Exchange Commission (SEC) has asked the federal government to consider its proposal to exempt corporate bonds from the payment of tax.

Lamido Yuguda, director-general, SEC, said this at a press briefing held recently on the outcome of the second capital market committee meeting (CMC) for 2022.

The CMC meeting had in attendance over 300 capital market operators.

A corporate bond is a type of bond issued by a corporation to raise financing for a variety of reasons such as for ongoing operations or to expand a business.

In 2012, the federal government exempted bonds and short-term government securities from income tax for ten years which recently expired on January 1, 2022.

Yuguda said the exemption of tax on corporate bonds would help to unlock the attractiveness of the corporate bond market.

“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,” he said.

“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.”

Speaking further at the meeting, the SEC DG announced 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 gotten the support of the federal government through the minister of finance, budget and national planning on the revised Nigerian capital market master plan (2021 -2025).

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 place for market operations.

He also encouraged all stakeholders to continue to work towards reducing the volume of unclaimed dividends and reiterated that stiff penalties will be meted out on faulting members.

Yuguda added 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,” he added.

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