19 June 2012

Nigeria: Brokers Want Tax Incentives for Capital Market

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

"Tax incentives involving company tax should be applied to quoted companies while value 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.

According to him, the current high interest rates regime is 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 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 can yield in excess of 15 per cent in an economy with 12 per cent inflation rate, risk-averse investment practice will be the order of the day.

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 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 the 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 be sold at a profit in systematic and orderly manner. This matter is crucial as domestic investors have abandoned the market having lost money in the recent past.

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