Goddy Egene
The Finance ACT 2019 has the potential to boost collective investment schemes (CIS) including Real Estate Investment Trusts (REITs) that currently has $2.77 billion asset under management in Nigeria and encourage more investors to embrace securities lending to attract part of $2.44 trillion global market.
Speakers at a one-day symposium on, “Finance Act 2020,” organised by the Nigerian Stock Exchange (NSE) in partnership with KPMG in Lagos, signing of the Finance Bill into law represents a landmark achievement for the Nigerian capital market.
According to the Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, the elimination of double taxation in CIS as pronounced by the Act was expected to have a significant impact on the growth of the industry.
“We have convened committees and conferences to dimension the real estate industry and the necessary policy changes required to jumpstart 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, 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. So, this positive policy announcement is a good start towards increasing the viability of REITs for issuers and investors,” he said.
Onyema, said they also expected an exponential growth in securities lending activities which would further boost market liquidity given the elimination of tax on manufactured dividend arising from securities loan transaction.
Securities lending is the act of loaning a stock, derivative or other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit. When a security is loaned, the title and the ownership are also transferred to the borrower.
He explained that the multiple taxation embedded in securities lending business arrangement had slowed down its adoption in the Nigerian capital market despite being $2.44 trillion market globally.
“Whilst there have been some improvements with 20 million units of shares currently available for lending, the multiple taxation embedded in an securities leading 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.
He added that exemption of micro and small enterprises with an annual turnover of N25 million ($70,000) or less from paying company income tax by the Act aligned with the Exchange’s commitment to SMEs.
According to him, SMEs and growth companies in our ecosystem can now enjoy tax benefits thereby improving their operational efficiency.
Also speaking, Partner & Head, Tax, Regulatory and People Services, KPMG, Mr. Wole Obayomi, said the generous incentives for SMEs in the Finance Act coupled with the launching of the Growth Board for capital raising by that sector from the NSE, were timely interventions to drive the growth of the economy through the SMEs.
Speaking on the implications of the Act to Nigerian corporates, financial markets and economy, Senior Manager, Tax, Regulatory and People Services, KPMG, Mr. Ikechukwu Ene, said people needed to study the Act to understand it better.
Ene, stressed the essential areas in the Act for additional revenue generation as VAT increment, from five per cent to 7.5 per cent, changes in excise duty and global tax reforms, among others.
On global tax reforms, he said that Nigeria had realised that it was important to follow global trends in global tax.
