By Peter Egwuatu

The Securities & Exchange Commission and the Nigerian Stock Exchange have approved the bid by the Ondo State Government to raise fresh funds through its N50billion Debt Issuance Programme under which the State intends to issue a first tranche of N27 billion.

The State will be the 12th States to approach the capital market since the first debt issuance programme by Lagos State in February, 2009.

The approvals come against the backdrop of the Ondo State Government having complied with the constitutional and legal framework for borrowing money to finance developmental projects.

The Investment and Securities Act (ISA) requires a State desiring to borrow money to enact a law authorizing the issuance of bonds and specifying that a sinking fund fully funded from the consolidated revenue fund account be established. The Ondo State Issuance of Debt and other Securities Law 2011(“the Bonds Law”) was enacted and all the necessary approvals obtained.

The Ondo State, government under the leadership of the governor, His Excellency, Dr. Olusegun Mimiko has embarked upon an aggressive redevelopment of the State. Little wonder that the State has been adjudged the 6th largest economy in Nigeria. The State is endowed with abundant natural resources, huge mineral deposits and rich forest reserves creating enormous potential for industrial and economic growth.

The State has also experienced strong growth in its revenue potentials with its IGR and VAT growing by a compound average growth rate (CAGR) of 23 per cent and 25 per cent respectively between 2006 and 2010. A clear manifestation of the increasing levels of economic activities within the State.

The Government has projected a further 52 per cent increase over its 2010 IGR of N5.5billion to N8.4 billion in the 2011 fiscal year and a CAGR of 22 per cent till 2014. The State expects to achieve this IGR growth through initiatives which facilitate the reduction of fiscal leakages, upward review of economic rates, aggressive mobilization of taxes and introduction of electronic governance in its revenue collection activities.

A special committee comprising of senior state officials was recently commissioned to pursue this. The bond with a rating of A and A- respectively by Agusto and Global Credit Rating (GCR) respectively is a “general obligation bond”. This means that repayment will be made from current and future resources of the State.

The State has obtained an Irrevocable Standing Payment Order (ISPO) from the Ministry of Finance authorizing deduction of interest and principal from its share of the Federal Allocation at source. The ISPO immunizes the Ondo State bond from the default risk associated with other debt issuance programme.