The Securities and Exchange Commission (SEC) has advised state governments to focus attention on providing revenue-yielding infrastructure towards boosting their Internally Generated Revenue (IGR).
The Director-General of SEC, Mr. Mounir Gwarzo, said this when he featured on the News Agency of Nigeria (NAN) Forum on Sunday in Abuja.
Gwarzo stated that given the country’s economic situation, it is important for states to come up with projects that are self-sustaining.
In his words, “Some of us are encouraging state governments to look at a revenue bond rather than a general purpose bond. A revenue bond is a bond that they issue and is tied to the revenue of the project you are going to finance.”
“A general purpose bond is a bond that you issue and do all kinds of business with. The only comfort the investor would have is the irrevocable assistant payment order from the IGR.”
“Now, given the state of finances at federal and state levels, certainly that IGR cannot sustain it. So what some of us are saying is, states should look inward and come up with projects that can pay for itself.’’
According to the SEC DG, the states have been redeeming the bonds received from the government with adequate payment.
“We haven’t had any experience of defaults for the last 16 years since the advent of political system, there is no irrevocable ISPO that has been revoked.”
“They have been doing quite well but I know that because the deduction is outsourced they go straight to the sinking fund account and that has left the state with almost nothing.”
“And that is why we are saying that they should now diversify and they should also look at the amount they can actually accommodate.”
He explained that the laws guiding the issuance of bonds in the country were very robust.
“You cannot come to the market if your total indebtedness is more than 50 per cent of your preceding year’s revenue.”
“If your indebtedness for instance is N50billion and that N50billion is more than your preceding year’s, you cannot come to the market so that at a given time you will not put that state in a precarious situation,’’ Gwarzo said.
(NAN)
