In recent times, a Bill seeking a law to for the establishment of a Kogi State Debt Securities (Issuance) Law, 2013, was presented to the Kogi State House of Assembly, under the leadership of Rt. Hon. Momoh Jimoh Lawal, the speaker. The bond was deliberated upon and on its merit and subsequently passed into Law. Facts available in the Bills show that the N20 billion bond being sought under this Law is for the purpose of funding well-articulated and essential programmes geared toward accelerating the Kogi State Transformation Agenda under theleadership of Capt. Idris Wada.
It is however pertinent to be consciously self-educated by critics or learn that Bonds are Federal government of Nigeria securities, issued under the Authority of Debt Management Office (DMO). Since 2003, the Debt Management Office has been regulating the activities of use FGN bonds market. It is also important to note that while the Central Bank of Nigeria, acts as the issuing House and the trading on the floors of the Stock Exchange, the Central Security Clearing system Ltd, acts as the depositor of the bonds listed on the Nigerian Stock Exchange.
The bonds are debt securities liabilities of the federal government of Nigeria issued under the Authority of DMO and listed on the Nigeria Stock Exchange. The FGN has an obligation to pay the bondholder the principal and agreed interest as they fall due. Specifically, when you buy FGN bonds, you are lending to the federal government for a specified period of time. The FGN bond, is considered as the safest of all investments in domestic currency securities market because it is backed by the “full faith and credit” of the Government. The interesting aspect of the transaction is that they have no default risk, meaning that it is virtually certain your interest and principal will be paid as and when due. The income you earn, is exempt from state and local taxes.
In a nutshell, the government issues Bonds for the following reasons:
• To finance government deficits in a non-inflationary and sustainable manner.
• To enhance fiscal discipline and for the management of monetary policies.
• To restructure the existing debt stock of short term debt to longer term obligations.
• To establish a landmark yield curve which acts as a reference for pricing other Bonds issued by other bodies.
• To enhance and deepen the savings and investment opportunities.
The practice has been on both at the federal and state levels. For instance, following the approval of Mr. President, special purpose bonds were issued to selected banks for settlement of N75 billion pension arrears in the five deposit money banks that participated in the private placement arrangement. In addition, in 2006, FGN floated bonds for the payment of debt owed to local contractors worth N91.7 billion.
It would be recalled that in current times, even the Federal Government of Nigeria,indicated interest to raise funds through Bonds for funding specific projects such as the setting up of methanol plants, revival of the textile industry, payment of the terminal wages, of workers, building of infrastructural facilities and among others.
But be as it may, members of the public especially those not acquainted with the workings and advantages of the Bond system are questioning the government. The answer is not far-fetched. The dire need to take such step is occasioned by some compelling circumstances. For example the revenue profile of the state for the past two to three years as presented by the Office of the Accountant General and Board of Internal Revenue generated data shows that a total revenue of N59,604,621,673 and N59,168,018,584 respectively were the Internal Revenue, generated in the year 2011 and 2012. This includes the Statutory Revenue Allocation, Capital grants, VAT from Federation Account, miscellaneous and Internally Generated Revenue. With this data, it is conspicuously glaring that the state will not be able to carry out its capital projects, without putting in place needed mechanism for taking the bond.
Also in the year 2012 the Kogi State House of Assembly, appropriated into Law a total budget of N126,280,369,523 and a total of N132,676,844,415 in 2013. These approved estimates, were based on Statutory allocations from the Federation Account and the Internally Generated Revenue (IGR) which from the above Data,will not be able to provide the needed infrastructural development and the basic facilities in the state.
These were the facts and analysis contained in the Bill presented to the House. And for a House of Assembly that has distinguished itself as a front seater in robust legislation especially those that have impacts on the general development of thestate and provision of democracy dividends to the people of the state, took immediate steps to put in motion legislative machinery to deliberate on the Bill. The Assembly organized Public hearings on the matter, which were widely attended by representatives of civil society groups, stakeholders, financial experts and analysts. The Chairman House Committee on Finance and Appropriation, Hon. Gabriel Daudu and the House Committee on Judiciary and Protocol, Hon. Henry Ojuola emphasized that the public hearing was imperative in the effort to cross-breed ideas from stakeholders and financial experts on the fundamentals and implications of securing the bond without mortgaging the future of the state.
Leading the debate on the floor of the House, the Majority Leader, Honourable Yakubu Yunusa highlighted that the Bill is an Executive Bill seeking for the establishment of a body to be known as the Kogi State Debt Management Office whose main function as provided in Section 3 of the Bill is to facilitate the issuance of such Debt Securities for the State to maintain a reliable data base of all Debt Securities issued, loans taken or guaranteed by the government or any agencies and all contingent liabilities related therein.
In addition, Hon. Yunusa explained that the office when established, shall have the power to issue from time to time regulations and guidelines for the smooth operation of any Debt Securities and verify and services debts guaranteed or taken directly by the State Government.
The majority leader further added that in carrying out these enormous task in line with the provisions of this law, “a Board shall be established and to be headed by the Deputy Governor of the State along with capable executive team to include the commissioner, State Attorney General, the Secretary to the State Government, Accountant General of the State and a representative of the private sector with competent qualification on finical matter a member”. The Board in line with the provision of the Bill he noted shall approve policies, strategies and procedures to be adopted for the achievement of their objectives as well as appraise the economic and political impact of debt management strategies of the State. “The Board when necessary shall appoint Consultant comprising of persons with requisite technical competence form public or private sector or set up technical committee to include consultant to advise the office on such matters as may be determined form time to time”. According to the Majority Leader, for effective policy direction and day to day administration, a Director General shall be appointed by the Governor subject to the approval the House. The Board he added also has a Secretary who shall be a legal practitioner of at least seven (7) years post call to bar experience in corporate and financial law practice or work environment. “By implication the managerial capability of the Board in carrying out its function is not left in doubt”.
Also exploring the facts in the Bill, in order to establish necessity for its passage, the House that Section 6 of this Bill authorizes the state to issue any form of Debt Securities with fixed variable linked floating rates upon such other terms including the tenure as it deem it fit. “In pursuance to this section, the State shall raise and borrow any money required to finance the capital budget of the Government or meet the obligation of the State in respect of its public investment and commitment. All debt securities issued under the provision of this law shall be the obligation of the state to repay from all revenue or specified part of the revenue and monies or asset pledged or assigned to s0ecure the repayment of the debt securities”. “And drawing authority from this, the House commented that it is gratifying to note that this Bill makes provision for variables to be considered before specific or aggregate amount may be raise or borrowed through debt securities”. Such considerations the House added include total revenue of the Government for the year preceding the year in which the debt securities are issues,the current revenue of the Government, the average economic growth, the existing public debt portfolio and the gross domestic product of the state in the year preceding the year of any issue. It pointed out that with this provision there is no ambiguity in the processes of issuing securities in any given circumstance. “The primary aim of issuance of any debt securities or instruments is to ensure that such securities is directed towards the infrastructural development of the state particularly in the financing of infrastructural development projects and the provisions and improvement of facilities such as education, health facilities, large scale mechanized farming, industrial and commercial development of the state”.
In further allaying the fears over the bond issue, the House noted that proceeds of any issuance of Debt Securities or loan contracted will be issued and for what project or projects noting that Section 9 sub section (1) of this Bill clearly specified that all proceeds of any issuance of the Debt Securities or loan contracted by or on behalf of the state, shall be applied for specific purpose for which it was obtained and in accordance with the terms and conditions of agreement under which it was obtained.
Secondly, the House established that the issuance of any Debt Securities made in pursuance to this law, shall be published by legal notice in the gazette and announced to the public stating that the amount of money to be raised by an issue, the mode or modes of affecting the issue, the rate, interest payable on the money raised from the issued instrument, the date of redemption of the instrument, the purpose of raising the money and any other information to the Debt Securities which is deemed necessary to effectively raise the required sum.
Thirdly, the fear of redemption of such loan or debt instrument within the stipulated time frame the House said, is of public concern stressing that, that is why section 11 of the Bill categorically specified that the date for redemption of any Debt security issued shall not be later than twenty-five (25) years from the day of the issuance of the debt security. By implication it added whatever the project(s) in which the instrument is been sought under good management should be able to ensure repayment of the principal or premium and interest.
Fourthly, the Assembly said a Debt Service Reserve fund shall be established in line with the provision of this law. Section 15 of the Bill establishes this fund primarily to accumulate monies required for payment on principal or premium and interest.
The position of the House of Assembly also received expertise authorized and support from the Accountant General of the State, Mr. Paul Audu the Accountant General elucidated the fact that the Bill, when passed into Law, would enable the State to access a N20 billion bond repayable in seven years. The stance of the Accountant General who is an expert perhaps was important because it served not only as a reference point to the Assembly, but it was needed to allow the focus of the public on the Bond issue.
Mr. Audu averred that this Bill is therefore timely and must be put in place to give room for speedy development of the state. This Bill therefore deserves the desired support of the people of Kogi State at home and in the Diaspora for the much desired accelerated development of the State.
In a similar vein, the House also addressed and passed another important Bill, a Bill for a law to establish public private partnership for into law. The primary import of the Bill is to maintain public infrastructure or public assets and provide social amenities and other facilities through public private partnership in the state. In essence, the Bill is targeted at providing appropriate regulatory framework for the involvement of Public-Private Partnership (PPP) in the development of public infrastructures or public assets.
The Bill reads, in seeking to achieve this objective, a body shall be established and known as the Kogi State Public Private Partnership Bureau and shall be responsible for making policies and guidelines in respect of public-private partnership in the State.
And with these two important Bills passed into Law. It is expected that the innate passion and the uncommon patriotism of the Honourable members of the House of Assembly who have beaten odds to debate and worked for the passage of the Bills, will usher in a new Kogi through the Transformation of Capt. Wada. There is no doubting the fact that in the next two years the fruits of these pragmatics steps will start to unfold.
Be a patriotic and forwarding looking Kogite. Join the fast train of the Transformation Agenda geared towards fast tracking the growth, development and egalitarian Kogi State.
Don’t be aloof and unjustifiably critical. See it. Feel it. Touch it with your support and be part of the moving train to the promise land.
Augustine Akubo, ANIPR
Chief Press Secretary to The Speaker,
Kogi State House of Assembly.
