June 21, 2009

Ogun state first N50bn bond to open the state for investors — Gbenga Daniel

By Omoh Gabriel, Business Editor
OGUN state Governor Otumba


Gbenga Daniel has disclosed that the state was going to the capital market to raise N50 billion with N28 billion as the first tranche to invest in projects that will help open up the state for investment and have lasting multiplier effect on the economy of the state.

The propose investment he said will enhance the state future internal revenue generation. Speaking to journalist in his office in Abeokuta he said that the reason for the state taking the bold step is to help implement the master plan that the state government has come up with which has the future of the state in focus. Listing the projects that the proceeds of the bond will be used to finance, the Governor said “Some of the key development projects that the proceeds from the bond would be used to finance include:-

Gateway International Airport with associated rail systems, Stadia Development Projects, Gateway Holdings Limited Head Office Complex, Two   Uttra-Modern,   Multi-storey   Complexes   for   Ogun    Property   Investment corporation, Abeokuta, OK Free Trade Zone and Olokola Liquefied Natural Gas Project (OKLNGUDeep Sea Port
Free Trade Zone; Construction of major roads (including dualisation of Abiola Way/Adatan Road, Abeokuta,; Otta Road Network; Ifo to Kajola FTZ dualisation, the Imodi/lmosan/llisan/ago-lwoye road, and the Igbogila/Sawonjo/lgan okoto Road); Construction of Hostels for 5 Tertiary Institutions in Ogun State; Construction of 19 roads under the rural Road Development Initiative (Legacy Roads); Construction of various Water Schemes and Health Centers; Development of the Abeokuta City Center; Acquisition of Customized Independent high Capacity, Low Speed generators (Mini-Power Stations), and Industrial Parks”.

According to the Governor “The projects have been selected because they have the potential to dramatically transform the economy of Ogun State through massive employment generation, development of key infrastructure and ultimately Consolidate Ogun as a critical transportation hubs and nerve centre of economic activities. This would have a dramatic positive effect on the economy of the State and its inhabitants.

He further said “In its usual practice, the Ogun State Government has ensured it follows the due process in the lead up to the bond issuance programme. First, the bond process is deeply rooted in law since the programme has been established pursuant to the Ogun State Development and Savings Bonds Law, 1980 and the resolutions passed by the Ogun State Executive Council on April 29, 2009

The government has also written to notify the legislature about its intention. “Indeed, in the 2009 appropriation bill which has been passed into law by the Ogun State House of Assembly and assented to by the Governor, the funding gap and the issuance of the first series of the bond was expressly stated.

It is not only Ogun that has chosen the bond option for developmental purposes. According to Governor Daniel “ln recent times and in order to foster accelerated economic growth and sustainable urban development, Lagos State Government, for example, launched a 3- year N275billion Bond Programme. Of this, N50 billion (first series) was raised in December 2008 and another NI00billion (second series) is scheduled to be raised in 2009. In a similar vein, Kwara State Government recently announced a 2-year N50billion Bond Programme with N1 /billion being the first series in 2009.

“Many other States (over twenty) are currently at various stages of floating their own Bond Programmes. Some of such states include Abia, Enugu, Ebonyi and Imo”.

Continuing he stated “Why has bond become the instrument of choice among states. Those who should know say it is more economically viable to fund infrastructure projects with long term fund. It is clear that States raise bonds primarily to fund specific capital projects, matching long term projects with long term financing, or to bridge revenue shortfalls.
“In the 2009 Budget, there are revenue shortfalls in terms of funding available for executing identified capital projects. If the projects must be delivered according to the scheduled time line, funding and execution must commence now .

The   Ogun   State   bond   issuance   programme he said will   give   the   state   the   following advantages; .access to relatively cheaper source of long-term funds, raising of funds from a wider source of capital, greater flexibility in financing and repayment structure, better planning, management and forecasting, since there is a structure repayment pattern, a hedge against future interest rate fluctuation, inflation and other vagaries of the macro-economy”.