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SEC to monitor state government bonds

By on February 10, 2015

The Acting Director-General of the Securities and Exchange Commission, Mr. Mounir Gwarzo, has said the commission will closely monitor state governments, which have issued bonds to ensure that they meet their obligations.

Gwarzo said this in reaction to concerns by the Association of Corporate Trustees about the ability of the states to meet their obligations as a result of the current economic challenges, a statement by SEC said.

There have been concerns that the plunge in global oil prices may affect the ability of state governments to meet their obligations under the Irrevocable Standing Payment Order required for state bond approvals.

And, according to the SEC statement, the leadership of the association had during a visit to Gwarzo in Abuja said the issue was their biggest concern.

Gwarzo, however, reassured them that the commission would always act in their best interest.

He was quoted as saying, “The decline in crude oil prices affects the revenues of state governments and it is an issue we need to look at closely especially with a view to protecting investors which is ultimately our major responsibility”.

The ISPO is an important instrument that gives bond investors comfort as funds are deducted at source from the state’s federal allocation to go into the sinking fund from which investors are paid their coupons.

The statement said that Gwarzo told the trustees that the SEC, with the support of the Coordinating Minister for the Economy, would insist on the sanctity of the ISPO considering the impact the arrangement has had on the domestic bond market so far.

He also said there was an urgent need for state governments to diversify their revenue bases in order to meet their obligations.

The President of the association, Funmi Ekundayo, congratulated Gwarzo on his recent appointment as acting SEC DG and commended the commission for the various initiatives aimed at developing the capital market.