The Securities and Exchange Commission (SEC) has put paid to
plans by the Kogi state government to
raise about N20 billion debt through the capital market to fund some
developmental projects in the state.
| SEC DG, Oteh |
According to sources familiar with the deal, SEC has refused
to approve the plan by the state to raise bond after a careful look at the
debt profile of the state and concluded that, kogi state government might be
biting more than it can chew with the new debt issue if it is approved.
“The state has a lot of debt overhang and should not be
allowed to raise fresh fund from the market now,” the source told Global Business and finance focus.
It was learnt that the present debt to revenue ratio of the
state is about 1-4, meaning for every N 4 million earned by the state through
federal allocations and internally generated revenue, N1 million is being used to
service debt.
SEC, it was learnt has communicated its decision to refuse the
state approval for the bond, which would have pushed up the state debt profile
and probably set the state back in term of development.
Many states, include Lagos are tapping into the bond option
to fund some of their developmental project, in the face of dwindling revenue
allocations from oil earnings.
Recently, Lagos concluded the issuance of N87.5 billion
7-year bond to complete ongoing infrastructure projects in the state.
No immediate response from kogi state on the refusal of its
applications by the SEC, but sources said the state may have to reapply to
raise fewer amount, if it must get the commission’s approval.
“The state may have to reapply to raise about N10 billion or
less if it must scale the SEC approval,” another source said.
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