Issuing houses seek reduction of threshold for state bonds

• Increase total income by 15.1%
Association of Issuing Houses of Nigeria (AIHN), have urged the government to reduce the 60 per cent threshold pegged for the issuance of state bonds to enable more states access the capital market for bond raising.

The Association lamented that going by the threshold, only Lagos State has 60 per cent of its state revenue as Internally Generated Revenue (IGR), and capable of raising bond presently in the market.

The President of the Association, Sonnie Ayere, while speaking during the 2016 yearly general meeting in Lagos, at the weekend, lamented that the development constitutes a threat to their operations, as state bonds comprise a larger part of its business activities.

He explained that if the threshold were reduced to 40 per cent or above, it would stimulate transactions activities on that segment of the market and expand the pool.

Furthermore, he added that more states having access to raise bonds in the market would accelerate economic development because the states would have additional funds to invest in capital projects.

Ayere however pointed out that the states must not fail on its duty to service their obligation due to the reduction and access to market.

“When oil price dropped, revenue also dropped, the money being shared to states also dropped, so it became difficult for many to service their obligations. Remember they have to be bailed out through the Debt Management Office, so what the minister then did was to allow certain states that have very high IGR up to 60 per cent to go and issue a bond.

“Most states do not reach that 60 per cent threshold; some have 30 per cent while others 40 per cent. So what is being canvassed is that we engage with the minister to see if we can reduce that threshold to allow more states access the market, although not at the detriment of their being able to service their obligations.

“If you reduce the threshold like 30 or 40 per cent, those states that are qualified because of the reduction can service their obligations, and it would also enhance our operations, as we will have more transactions in the market.”

The 2nd Vice President, AIHN, Ike Chioke, said the Association has concluded plans to obtain a money market dealing licence, to enable institutions that operate across the market to fund any business within the market.

He added that it would create employment opportunities in the market and provide more liquidity to fund the real sector. “If you think about any named business, and you have the capital and assets, you can venture into the business.”

The Association grew its total income by 15.1 per cent to N44.12 million from N38.34 million recorded in the corresponding period in 2015. Total expenses dropped to N20.6 million from N24.4 million recorded in the previous year.