The National Economic Council chaired by Vice- President Yemi Osinbajo was on Thursday told that Federal Government bonds had been issued to 14 banks on behalf of 11 state governments as part of the plan to restructure states’ loans in commercial banks.
As part of the plan, the Federal Government had approved the conversion of states’ loans in commercial banks to Federal Government bonds.
This is in line with the palliatives President Muhammadu Buhari had approved for state governments to enable them to meet their financial obligations.
The 11 states, which are beneficiaries of the FGN bonds issued to the 14 banks, were among the 22 states who had applied for their commercial loans to be converted to FG bonds as of August 19.
Four governors, Ibikunle Amosun (Ogun); Willie Obiano (Anambra); Abdulfatah Ahmed (Kwara); and Muhammed Badaru (Jigawa), briefed State House correspondents at the end of the meeting.
The NEC which is chaired by Vice-President has all state governors as members.
Ahmed said the latest on the terms of restructuring of states’ indebtedness to commercial banks were contained in the presentations made to the council by the Central Bank of Nigeria and the Debt Management Office.
He said the bonds for the 11 states were issued to 14 banks after they submitted the reconciled figures and other required documents for the restructuring.
Ahmed, therefore, urged the remaining 11 states to quickly put their documentation in place to ensure that they fitted into the time schedule.
The governor said, “The DG of DMO told the council that based on the approval of Mr. President on the plan to restructure bank loans of states into FG bonds in order to address fiscal imbalance, 22 states had submitted reports and applied for restructuring as of August 19.
“The DG also said the DMO had requested the states to reconcile figures with the banks and had been jointly authenticated with the banks as of June 30.
“As of August 14, out of the 22 states that applied, FG bonds had been issued in respect of the loans of 11 states.
“The bonds were issued to 14 banks after submitting the reconciled figures and other required documents for the restructuring.
“DMO is now reviewing the additional submissions by states in the second phase of the programme.”
Economic and financial experts said the loan conversion deal was good for the banks and the state governments because the bond certificates issued to the 14 banks on behalf of the 11 states meant the states were no longer indebted to the banks.
The Head, Asset Management, Meristem Asset Management Limited, an investment advisory firm Mr. Taiwo Yusuf, said, “What the bond certificates issued to the 14 banks mean is that the states are no more indebted to the banks. The Federal Government through the DMO has taken that up. While I don’t know much about the 14 banks, it can be inferred that the 14 banks are the lenders the 11 states were exposed to.”
The Head, Research and Investment, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said, “It is good news for the banks considering the challenging financial situations some of them are passing through.”
The Federal Government bailout package for the 36 states includes the sharing of about $2.1bn (N413.7bn) in fresh allocation between the states and the Federal Government.
Another measure is a CBN-packaged special intervention fund that offers financing to the states, ranging from between N250bn and N300bn.
The third measure is a debt relief programme proposed by the Debt Management Office which will help states restructure their commercial loans currently put at over N660bn and extend the tenure of the loans to 15 years, thereby reducing the states’ debt service obligations.
However, Obiano said the Ministry of Finance reported to the council that the current Excess Crude Account proceeds stood at $2.207bn as of August 2015.
He added that the Group Managing Director of the Nigerian National Petroleum Corporation, Dr. Emmanuel Kachikwu, also briefed the council on ongoing reforms in the petroleum industry.
He said Kachikwu told the council that the reforms would cover aspects of performance management, transparency and accountability and zero tolerance for corruption among others.
He said the GMD urged the state governors to assist in protecting oil and gas infrastructure in their states.
Amosun on his part told journalists that Governor Adams Oshiomhole of Edo State presented what he called a provisional report of the five governors asked by the council to review the operations and management of the ECA and the Federation Account.
He quoted Oshiomhole as reporting that all the necessary agencies had been invited while two audit firms had been appointed to find out what transpired within the last five years.
The governor said the council was expected to receive the committee’s final report next month.
He explained that no law was violated in appointing the audit firms since the governors carrying out the probe needed expertise.
Badaru said the council was also briefed on developments in the power sector, saying there had been overall increase in power supply by 29 per cent as of the first six weeks of the present administration.
He said power generation reached 4,6662MW by July 29.
The governor also said that the council was informed that the Transmission Company of Nigeria’s management contract had been extended for another year.
He said the council was informed that there was currently a 45 per cent default rate on payment of electricity bills by state governments.
Badaru said state governments had therefore been urged to ensure payments of electricity bills by their Ministries, Departments and Agencies.
Badaru added that the state governments were also urged to assist with the provision of security to reduce vandalism of distribution assets.