By Peter Egwuatu

In its pursuit to rekindle investors’ interest in the embattled Nigerian capital market which went down since the global financial meltdown in 2008, and attract investment for long-term development, the Securities and Exchange Commission (SEC) took its awareness programme to Rivers State where the people and government were tutored on the need to access the market to fund its several ongoing projects.

Prior to the meeting, Rotimi Amaechi, Governor of Rivers State and some indigenes of the state appeared to be adverse to loans from institutions, as they believed their repayment is tantamount to mortgaging the lives of its citizens.

*Rotimi Amaechi, Rivers State Governor

However, after a three-day education outreach organised by the SEC in collaboration with the Government of Rivers State, the state indigenes and the entire government officials became convinced that such facilities will assist the developmental efforts of the state as a result of the pressing need of developmental projects in the state that are begging for funding.

As a result, the State House of Assembly announced an approval of N250 billion bond to be raised from the capital market. The first tranche of N100 billion is expected to commence in October 2011 and has a tenor of three years.

Director- General of the Commission, Ms Arunma Oteh, who had been so passionate to see to the development of the Nigerian capital market and the economy in general, was impressed with Governor Amaechi’s progress in the provision of infrastructure in order to attract investors to the state.

In her opening remarks, she said “The Securities and Exchange Commission, SEC Nigeria, is delighted to be in Port Harcourt, Rivers State, a state known for its hospitality, its rich culture and its leadership role in the Nigerian economy for a three-day Investor/Issuer Education Outreach programme.

The choice of Rivers State is not in doubt given its strategic importance to Nigeria as an oil-producing state with huge agricultural potential, which if properly harnessed, will boost the revenue base of the government and improve the living standards of the people.

Rivers State is also one of the most industrialised and commercialised states in the country and is indeed the “heart” of the Niger-Delta.

*Arunma Oteh, DG. SEC

Continuing, she said, The Commission is impressed by the progress made in less than four years by your administration in the provision of critical infrastructure such as roads, power, schools and health care facilities which are the important building blocks in the transformation of an economy and towards meeting the millennium development goals.

As a matter of fact, the ongoing monorail project, we believe, will have significant impact in easing the well-known traffic problems of the state.

The Commission also wishes to acknowledge the much improved security situation in the state in particular and the Niger-Delta in general. There is no gainsaying that security is overly important in attracting local and international investors.

Your Excellency, we are proudly grateful for the opportunity to visit a number of transformational initiatives – the power generation plant, the Songhai farm, the primary health centres, the primary and secondary schools. We commend you for your transformational leadership.

You will agree with me that like other states in the country, there are still huge developmental needs and challenges in Rivers State. We do know that earnings from crude oil upon which our country has largely depended on is subject to the vagaries of the international oil market and are not adequate to meet the developmental challenges of the country.

You will equally agree that for most states, internally- generated revenues are still largely low. That is why other financing options including capital market financing are important.

Oteh, said – As you know, the capital market is a market for medium and long-term capital. Put differently, it is a market where governments and companies can obtain funds to finance projects that have long gestation period.

Reliance on short-term funds for financing long-term projects is a mismatch and can put borrowers in a precarious financial and operational situation. The capital market also creates a window that provides liquidity necessary for holders of long-term securities.

It is a truism that the capital market has several benefits to economic development. It is important to state emphatically that no nation can develop without long term capital, a reason why governments make concerted efforts to promote the market and ensure its stability as an integral part of financial sector development.

Legal, regulatory and institutional frameworks are critical to capital market development. That is why securities laws are enacted and Securities Commissions established as apex institutions to regulate capital markets.

The SEC boss further said, In addition, the capital markets also foster transparency and good governance.  Indeed, for a state government or company to raise money from the capital markets, it has to go through a rigorous process including preparing audited financial statements and rating reports which expose it to scrutiny of third parties and independent stakeholders.

Also unique to Nigeria is the fact that SEC inspects projects and monitors the use of the proceeds of a bond issue.  We are further strengthening these processes to ensure the highest levels of scrutiny as we build a world class bond market.

There are many companies in Rivers State particularly in the Oil and Gas sector that can explore the possibilities of listing on The Nigerian Stock Exchange (NSE).

The benefits of such listings are enormous but there are also responsibilities attached to listing. Although there are no applications before the Commission for capital- raising presently, we are delighted that Rivers State is considering accessing the capital market to fund some of its developmental projects.

It is our expectation that the projects to be financed through the capital market will have significant positive impact on the development of the State with multiplier effects on the well being of the indigenes and residents.

Responding, Governor Amaechi said he was ready and determined to transform the state into a commercially viable entity, since the N250 Bond will help finance the state’s capital projects being part of dividend of democracy to its people.

He said that it has become germane as its Internally Generated Revenue (IGR) and facilities from banks cannot finance the projects he wants deliver to the people, and which make the state standout among its pears in terms of infrastructural development.

Addressing stakeholders at the opening of a three-day investors/issuer education programme organised by the Securities and Exchange Commission (SEC) in collaboration with the state government, the Commissioner for Finance, Mr. Chamberlain Peterside said issuing the bond has become critical to the development of the State.

In his paper titled: Rivers State N250 billion Bond programme critical issues at stake, Peterside said the bond which is expected to come on stream in October this year is geared towards the state’s desire to continue investment in infrastructure that is highly critical to its development.

He said with an Internally General Revenue (IGR) rising from N19,9 billion in 2005 to N58.4 billion in 2010, the state is capable with all infrastructure and developmental projects in place, of meeting its obligation in the bond issuance.