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Onyema says signing of Finance Bill landmark achievement capital market

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Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema said the signing of the Finance Bill into law represents a landmark achievement for the Nigerian capital market.

According to him, since 2014, the Exchange alongside Securities and Exchange Commission (SEC) as well as other capital market stakeholders have been at the forefront of advocacy with policy makers and tax authorities for favourable tax structures for primary and secondary markets activities in the Nigerian capital market.

Speaking recently at the capital market stakeholders’ symposium on the Finance Act 2019, on the floor of the NSE, Onyema said the signing of the Finance Bill into law represents a landmark achievement for the Nigerian capital market.

This includes tax incentives for public companies and capital market investors, removal of double taxation in CIS and REITs as well as manufactured dividend in securities lending to mention a few.

The event was held in collaboration with KPMG Nigeria to highlight the implications of Nigeria’s Finance Bill 2019 passed into law by the National Assembly in October 2019. The Bill, which took effect February 1, 2020, has the objectives to promote fiscal equity, align domestic laws with global best practices, support MSMEs, increase government revenues and incentive activities in the capital market.

Onyema said, the elimination of double taxation in Collective Investment Schemes (CIS) including Real Estate Investment Structures as pronounced by the act is expected to have a significant impact on the growth of the currently nascent $2.77billion asset management industry in Nigeria.

“We have convened committees and conferences to dimension the real estate industry and the necessary policy changes required to jump start financing into the sector, and so this positive policy announcement is a good start towards increasing the viability of REITs for issuers and investors. With the nation’s housing deficit put at 17 million units as estimated by the African Development Bank (ADB), I believe strongly that REITs and other real estate investment vehicles will play a critical role in funding real estate and infrastructure development in Nigeria.

“We also expect an exponential growth in securities lending activities which will further boost market liquidity given the elimination of tax on manufactured dividend arising from securities loan transaction. Whilst there have been some improvements with 20 million units of shares currently available for lending, the multiple taxation embedded in an SLB arrangement has slowed down its adoption in the Nigerian Capital Market despite being a $2.44 trillion market globally.

“The recent amendment to the tax laws by the Finance Act 2019 is in line with global best practices for Securities Lending and I want to seize this opportunity to enjoin capital market operators and asset owners to take advantage of the benefits in expressing your views of the market via short or long positions,” Onyema said.

Speaking further, he maintained that the pronouncement in the Finance Act which exempts Micro and Small and Medium Enterprises (MSME) with an annual turnover of N25 million ($70,000) or less from paying company income tax aligns with the exchange’s commitment to SMEs as recently demonstrated with the launch of our growth board segment dedicated to fast growing companies seeking to raise public capital.

He said, “SMEs and growth companies in our ecosystem can now enjoy tax benefits thereby improving their operational efficiency.

“The NSE, in its efforts to support the growth of the Nigerian economy and its issuers is, therefore, happy to collaborate with leading tax expert, KPMG to highlight the implications of these new rules and provide guidance on how to effectively navigate the provisions of the bill, especially as it relates to taxes.”

Speaking to the Finance Bill 2019, Partner & Head, Tax, Regulatory and People Services, KPMG, Mr. Wole Obayomi said, “Finance Act 2019 is a landmark legislation that should be embraced by all stakeholders to ensure it achieves its laudable objectives. The removal of multiple tax footprints for securities lending and real estate investment schemes is expected to stimulate activities in those segments of the market.

“The generous incentives for the SMEs in the Finance Act coupled with the launching of the Growth Board for capital raising by that sector from the NSE, are timely interventions to drive the growth of the economy through the SMEs. Overall, the Finance Act 2019 is a welcome development,” he said.

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