SEC: Accessing Capital Market Will Benefit States

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Goddy Egene
The Securities and Exchange Commission (SEC) is encouraging state governments to access the Nigerian capital market for funds to finance projects and infrastructure to develop their respective states.

State governments raise long-term funds from the capital through bond issuance. In the past, many states including Lagos, Ekiti, Delta, Edo State, Yobe, Osun among others, have raised funds from the market.
However, the acting Director-General of the commission, Ms. Mary Uduk, recently said raising funds from the capital market would be beneficial in several ways.

“It will be good for their accounts as it will help them clean up the accounts. It will be good for transparency and financial obligation to be transparent and it will be good for funding of capital projects for development,” she said.

According to her, the commission was prepared to assist states to raise the needed funds once the rules are met.
The rules guiding bond issuance in the capital market by states, stipulate that the total loan portfolio of a state at any particular time must not exceed 50 per cent of the revenue generated in the previous year.

Explaining why states should access the market for funds, another official of SEC told THISDAY that the urgency in meeting the infrastructure development in most states had made it imperative for them not to wait for federal government’s allocations before embarking on provision of such amenities for the masses.

“It is obvious that the citizens are in hurry to see infrastructural development in their states, but in most of the states, the revenues are not enough to take care of recurrent expenditure let alone capital projects. So, it will be a wise decision for any state to access the market for long term funds, which can be used to provide some infrastructure and conducive environment for business to thrive.

“Such improved infrastructure and environment can lead the internally generate revenue, which can be used to repay the bonds on the long run,” the SEC senior official said.

The Governor of Ekiti State, Dr. Kayode Fayemi, recently visited the Nigerian Stock Exchange (NSE), a move which indicated an intention to source funds from the market in the very near future.
The Chief Executive Officer of NSE, Mr. Oscar Onyema, had assured Fayemi that the exchange would partner Ekiti State to get access to the right capital.

Onyema said: “We have been longstanding partners with Ekiti State in accessing such capital. Your Excellency would recall that during your previous term in office between 2010 and 2014, The exchange supported the issuance and listing of the N20 billion Fixed Rate Infrastructure Development Bond, which financed a number of projects including the Ikogosi Warm Spring redevelopment, the Ekiti Water Works construction, as well as the refinancing of high-interest borrowings by the state.

“In that time frame, the Ekiti economy expanded by over 63 per cent in nominal terms to become a trillion naira economy, according to data from the National Bureau of Statistics. The State also recorded a 15 per cent improvement in terms of the enabling business environment assessments by the World Bank.

“Today, the exchange is even more strategically positioned, having transformed into a multi-asset class exchange hub, to further support the developmental goals of Ekiti State in unlocking significant investment value through the listing of public utilities and state-owned enterprises, issuance of subnational bonds, as well as promoting the knowledge economy within the state in terms of public sector capacity building through our technology based learning management system.”