Cross River Debt Burden: 633m To Be Deducted From State Monthly Allocation For 84months

An extensive utilization of the Freedom of Information Law by Cross River born civil rights activist and APC Chieftain, Barrister Okoi Obono Obla is unearthing numerous details about how the finances of the state have been managed by the immediate past administration of Liyel Imoke.

It will be recalled that the Cross River State House of Assembly on 15 August, 2014 adopted a seven point resolution authorizing the state government to refinance part of its commercial bank loan through the capital market by the issuance of bonds not exceeding 40 billion naira.

The House also approved the engagement of First Bank of Nigeria Capital Limited as the lead issuing house and the financial adviser to carryout documentation, obtain regulatory approval and sale of the bond issues.

The resolution was adopted following a correspondence from the former state governor, Senator Liyel Imoke for a resolution to enable the state refinance its commercial bank loans and engage issuing houses for that purpose.

Following the adoption of the resolution, FBN Capital Limited went to the market and last week announced the successful conclusion of the Series 1 Bond Issuance offer for the Cross River State Government, under its N40 billion bond issuance program.

The 7-year tenured Bonds with maturity due in 2022 were issued via a Book Building process by FBN Capital Limited. Proceeds from the Issue have been earmarked for refinancing the State’s outstanding obligation to the lending banks. The Bonds which were offered at 17% coupon rate (paid semi-annually) purportedly proffer a cheaper financing option to the State.

According to FBN Capital, as Lead Issuing House, they led the league of the Issuing Houses to underwrite the transaction to the tune of N6.25billion on a standby basis.

The Bond Offer was secured by an Irrevocable Standing Payment Order (ISPO) issued by the Federal Ministry of Finance as a first line charge upon and payable out of the Statutory Allocation of the State.

By this order a Sinking Fund account was created and managed by the Trustees to the Issue from which bondholders’ obligation (interest and principal) would be repaid.

Accordingly, Barrister Okoi Obono Obla under the FOI Law, wrote to the Securities and Exchange Commission requesting documents to confirm if the state government complied with the provision of Section 224 of the Investments and Securities Act 2007 in respect of the 40 billion Naira bond issued by the state government to raise money from the capital market.

In a brief reply signed by Abdulkadir Abbas, Deputy Director, Securities Offering to Barrister Obla, which was obtained by CrossRiverWatch, the commission writes: “We refer to your application dated 20th June 2015 for certified true copies of the documents specified in your letter dated 24th February 2015, in respect of the Cross River State Government Bond Issuance and further payment of the certification fees.

“Please find enclosed the certified documents as requested.”

One of the documents enclosed in the letter by the Securities and Exchange Commission, which was also made available to CrossRiverWatch, is a letter from the Home Finance Department of the Federal Ministry of Finance, signed by, K. Zaji, Director, Home Finance, with reference number F.12975/T/40 dated May 12, 2015 addressed to the former governor of Cross River State, Senator Liyel Imoke.

The letter reads:

“RE: PROPOSED CROSS RIVER STATE GOVERNMENT OF NIGERIA BOND ISSUE-IRREVOCABLE STANDING PAYMENT ORDER (ISPO)

“I am directed to refer to His Excellency’s letter Reference No. GO/S/21/VOL.1/50 dated August 4, 2015 on the above subject and to convey the approval of the Honourable Minister of State, Finance for commencement of deduction on the approval ISPO in respect of the proposed N31, 994, 688, 440. 45 (Thirty–One Billion, Nine hundred and ninety-four million, six hundred and eighty-eight thousand, four hundred and forty-five Kobo only).

“Consequently, the sum N633, 134, 951. 92 (Six Hundred and Thirty Three Million, One Hundred and Thirty Four Thousand, Nine Hundred and Fifty One Naira, Ninety-two Kobo) would be deducted monthly from the Statutory Allocation of Cross River State Government for 84 months with effect from May, 2015 and paid into the following Stinking Fund Accounts:

“First Trustees/Cross River SF A/C
FBN Limited, Abibu Oki Branch
Account No. 2024750552
Sort Code No. 011152426

“Skye Trustees/Cross River State Bond Account
Skye Bank Plc, Skye House, Alausa Branch
Account No. 1771596454
Sort Code No. 076151640

“Please accept the assurances of the Honourable Minister of State, Finance.”

Meanwhile, governor Ayade, whose administration is now the beneficiary of the funds realized from the bond issue, has said that he did not inherit an empty treasury but a state with numerous potentials.

Whether the governor’s present position is a statement of fact or a political statement; time will tell.

culled from Crossriverswatch

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