There are indications that cash-strapped state governments would be trooping to the capital market to source long term funds. This was disclosed by Mounir Gwarzo, Director-General, Securities and Exchange Commission (SEC). “I know one or two states have started talking to investment banks with the view of coming to the capital market. Given their financial situation, the capital market is the best avenue for them, because some of them have lots of loans from commercial banks,” he said.
Some of the 36 states are unable to pay employee wages after their allocations from the Federal Government, which accounts for the bulk of their budgets, declined.
Gwarzo said that for now, no state applied to the SEC to sell bonds this year. However, some state governors have discussed the possibility with the commission. “They’re very excited about it. If they restructure the commercial loans, it will give them breathing space and temporary liquidity to pay salaries and allowances,” he said.
He also disclosed that SEC is planning to start separate meetings with the state governments this year to educate them “about the importance of capital market. “Once the instruments are good and investors are comfortable, we believe they will invest,” he said, referring to state bonds.
By Dike Onwuamaeze
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