Debt Restructuring: Osun, Delta, Ogun, Eight Others Issue N322.78bn Bonds

Debt Restructuring: Osun, Delta, Ogun, Eight Others Issue N322.78bn Bonds

11 more states to follow as ECA rises marginally to $2.207bn
Tobi Soniyi in Abuja
In a bid to secure debt relief that will free up funds to meet their financial
obligations to workers, contractors and other debtors, Osun, Delta and Ogun have
topped the list of 11 states, which have issued federal government bonds (FGN
Bonds) to 14 commercial banks under a debt-restructuring programme facilitated
by the federal government.
The 36 states of the federation had approached President Muhammadu Buhari in
June to ask for a bailout that would enable them pay salary arrears to their
employees and meet other pressing obligations.
In response, the president approved the disbursement of $1.7 billion paid into the
Federation Account by the Nigerian Liquefied Natural Gas (NLNG) company to the
three tiers of government; a Central Bank of Nigeria (CBN) N250 billion to N300
billion Special Intervention Fund meant solely for the payment of backlog of staff
salaries; and the restructuring of their commercial loans with the banks through
either bond issuance or into long tenored loans of 20 years.
Seizing on the opening, 22 states of the federation have applied to the Debt
Management Office (DMO) for their debts to be restructured into FGN Bonds.
This was disclosed on Thursday at the 60th National Economic Council (NEC)
meeting held at the council chamber in the Presidential Villa, Abuja.
Of the 22 states, 11 have been screened by the CBN and DMO, and FGN Bonds
issued to 14 banks.
Information obtained exclusively by THISDAY showed that Osun State issued a
bond of N88.6 billion, Delta – N69.8 billion, Ogun – N55.4 billion, Imo – N37.1
billion and Ekiti – N18.8 billion.
Others are: Kwara – N15.6 billion, Edo – N11.9 billion, Benue – N10.9 billion, Oyo
– N9.1 billion, Bauchi – N6.5 billion and Kogi – N0.81 billion.
A source at the CBN, however, clarified that the option to restructure their
commercial loans with the banks to longer tenors of 20 years, at an interest rate
of 16 per cent, was still available to the states.
At the meeting, which was presided over by the vice-president, Professor Yemi
Osinbajo (SAN), the council received briefings on developments in the economy,
the power and energy sectors from the Governor of the CBN, Mr. Godwin
Emefiele, the Director-General of the DMO, Dr. Abraham Nwankwo, Group
Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr.
Emmanuel Ibe Kachikwu, and also from the ad hoc committee of the council on
the management of the Excess Crude Account (ECA).
Briefing journalists at the State House after the meeting, Governors Willie Obiano
(Anambra), Abdulfatah Ahmed (Kwara), Abubakar Badaru (Jigawa) and Ibikunle
Amosu (Ogun) explained that the restructuring was an avenue provided by the
federal government to assist indebted states.
Highlights of the meeting included the report by the Permanent Secretary,
Ministry of Finance, Mrs. Anastasia Nwaobia, that the current ECA stood at US
$2.207 billion as at August 2015.
Also, Edo State Governor, Adams Oshiomhole, presented a provisional report of
the ad hoc committee set up by NEC to review the operations and management
of the ECA/Federation Account.
The Director-General of the DMO told the council that based on the approval of
the president on the plan to restructure bank loans of the states into FGN Bonds
in order to address their fiscal imbalance, 22 states submitted reports and applied
for restructuring as at August 19.
Nwankwo added that the DMO had requested the states to undertake
reconciliations with the banks and ensure that their loans had been jointly
authenticated with the banks as at June 30, 2015.
A briefing note issued at the end of the meeting by the Senior Special Assistant
to the Vice-President, Media and Publicity, Mr. Laolu Akande, said: “As at August
14, 2015, of the 22 states that have applied, FGN Bonds have been issued in
respect of the loans of 11 states.
“The bonds were issued to 14 banks after submitting the reconciled figures and
other required documents for the restructuring.
“DMO is now reviewing additional submissions by states in the second phase of
the programme.”
The CBN governor also briefed the council on the economy and exchange rate
management.
The governor attributed the economic situation to declining oil prices, which have
put a drag on the country’s foreign reserves, exchange rate movements and put
pressure on the domestic currency, inflation and the CBN’s tight monetary policy.
Emefiele briefed the council on some of the measures the CBN had put in place
to address the situation, including interventions in the foreign exchange market to
stabilise rates; cessation of foreign currency cash deposits in banks; closure of
the CBN official foreign exchange window; reclassification of eligible goods; and
services to the window.
Oshiomhole, after presenting the provisional report of the committee on the
operations and management of the ECA/Federation Account, told the council that
the committee had invited all the relevant revenue generating agencies of the
federal government which contribute to the Federation Account.
The Edo governor informed the council on the appointment of two international
audit firms to carry out a forensic audit of the ECA/Federation Account from
January 2010 to June 30 2015, in order to arrive at a comprehensive report on the
operations of the ECA/Federation Account.
He told the council that a more comprehensive report would be submitted later.
The council also received briefings from NNPC’s GMD on the ongoing reforms in
the petroleum industry.
He informed the council that the reforms would offer aspects of performance
management, transparency and accountability, proper focus in investment
attraction, zero tolerance for corruption, cost auditing improved stakeholders
management and relationship, and image rebranding, among others.
Kachikwu also urged the governors to assist in protecting oil and gas
infrastructure in their states.
The council was also briefed on the developments in the power sector under the
present administration in the last two months.
Council was informed that there was an overall increase in power supply by 29
per cent in the first six-weeks of this administration compared to the last weeks
of the previous administration.
The statement further read: “Council was informed that power generation reached
a significant 4,662MW by July 29, 2015.
“That there is now a publicly accessible websitewww.nesistats.org to bring a new
level of transparency in the sector.
“That the TCN (Transmission Company of Nigeria) management contract has been
extended for another year.
“Council was also informed that some of the next top priorities for the next two
months in the power sector are: the repair of stranded hydro capacity, to reduce
load rejection by Discos and stop haemorrhaging of gas from power plants to
industrial off-takers, as well as fixing major transmission and transformation
constraints.”
NEC also called on the state governments to ensure payments of electricity bills
by their ministries, departments and agencies (MDA).
Council was informed that there is a 45 per cent default rate among the states in
the pay of their electricity bills.
The states were also urged to provide security to reduce vandalism of electricity
distribution assets in their domains.