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Cash-strapped states seek to restructure bank debts to long-term bonds

By on June 26, 2015

As part of measures by the cash-strapped states of the federation to raise funds to pay salary arrears and meet other pressing obligations, the state governors have been given the green light to restructure most of their bank loans running into billions of naira by converting them into bonds, THISDAY has learnt.

This was one of the outcomes of the meeting between the governors of the 36 states and President Muhammadu Buhari on Tuesday.
The Chairman of the Nigerian Governors’ Forum and Zamfara State Governor Abdulaziz Yari had announced after the meeting that the total debts of the states stood at N658 billion.

He said the governors had drawn the president’s attention to the fact that most of the loans (including mid-term bonds) owed by the states had tenures of between four and seven years, making the case that they should be restructured to longer tenured instrument that would give the states some relief and assist them in the execution of projects including the payment of salaries.

Specifically, a source from the Debt Management Office (DMO) privy to the meeting, said the state governors asked that the loans, which they argued was short-term debt, be restructured through the issuance of bonds with 15 to 20 years maturity.

In response, Buhari was said to have informed the governors that their request would be feasible, but would be subject to the advice he gets from his yet-to-be assembled economic team, the approval of the Central Bank of Nigeria (CBN), and the approval of their respective state Houses of Assembly.

The DMO source disclosed that the governors were asked to review their debts and present them to the federal government for consideration.
He said the DMO and CBN were already holding discussions on the governor’s request in order to speed up the process for restructuring the loans to provide the states with the relief that they need.

The liquidation of the longer tenured bonds, if approved, will be done through the Irrevocable Standing Payment Order (ISPO) that the states would have to sign permitting the Accountant General of Federation (AGF) to have a first line charge on their respective statutory allocations from the Federation Account.

THISDAY also gathered that Buhari advised the state governors to pursue all means to recover funds stolen by their predecessors and other officials as way of raising additional cash.