18 June 2012

Nigeria: Brokers Call for Tax Incentives for Companies

Trading session at NSE

By Goddy Egene

Stockbrokers operating in the Nigerian capital market have called on the Federal Government to give tax incentives to quoted companies as a way of deepening the market and encouraging more listings.

Speaking at his investiture ceremony in Lagos last Friday, the new President/Chairman of the Chartered Institute of Stockbrokers (CIS), Alhaji Ariyo Olushekun, noted that tax incentives would make listed companies to remain quoted, while new ones would be encouraged to access the market.

"Tax incentives involving company tax should be applied to quoted companies while valued added tax (VAT) and withholding tax should be eliminated or significantly reduced for market transaction. Stamp duty, I dare say, is no longer relevant and thus should be eliminated," he said.

Olushekun added that in order to revive the capital market, interest rates should also be managed very well, outstanding margin debts issues should be resolved and investor education intensified.

According to him, the current high interest rates regime was harmful to productive activities and is equally affecting the patronage of the capital market.

He said: "High interest rates impair ability of business to launch new projects and products, reduce profitability of companies(quoted and unquoted), threaten loan repayment by borrowers and drive fund away from active entrepreneurship to passive investment in risk free government securities."

The CIS boss noted that if gilt-edge and tax-free government bonds could yield in excess of 15 per cent in an economy with 12 per cent inflation rate, risk-averse investment practice would be the order of the day.

"Hence, it will be difficult for the capital market with a recent history of depression to play its role of pooling savings for developmental purposes," he declared.

Olushekun reiterated the brokers' call for the establishment of a stabilisation fund , saying it would fast-track the revival of the market.

He explained that similar to the quantitative easing being implemented in some developed economies, it is essential that Asset Management Corporation of Nigeria (AMCON) or any special body was empowered to intervene in the market by purchasing and warehousing undervalued securities with strong fundamentals.

"These can subsequently been sold at a profit in systematic and orderly manner. This matter is crucial as domestic investors have abandoned the market having lost money in recent past. If we cannot bring them back, quickly enough, we should not leave the market at the mercy of foreign portfolio investors who have more options available to them and can quickly bring volatility to the market from their country's allocation actions," he said.

The CIS president assured that the Institute was ready to cooperate with other market institutions to restore the Nigerian capital market to its glorious days.

Meanwhile, the immediate past president, Mr. Mike Itegboje, commended the stockbrokers for their support during his tenure from 2010 to 2012 and called for a similar support for the new president.

According to him, during his tenure, CIS recorded some achievements including insurance policy for members, new educational programmes, award of excellence to quoted companies, registrars that stockbrokers interface and interact with, revival of annual dinner/ awards and improved package of remuneration for staff members.

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