Proshare Logo
   Market Date: 23-04-2014   
Agriculture All One Min News Archives Bonds Cap Mkt Sentiments Capital Market CASHLESS NIGERIA Commodities Corporate Earnings Daily & Weekly Market Updates Enterpreneurship ETFs Forex Frauds & Scandals General Global Market Insurance Investors NewsBeat Islamic Finance Mergers & Aquisitions Money Market Mortgage Mutual Funds Nigeria Economy Oil Sector Opinions and Analysis Pensions People Politics Power Products & Services Professionals Property Public Offers Private Placements Regulators REITs STOCKPICKS Taxation Telcos Travel & Tours Unlisted Stocks World of Business

CBN releases guidelines for granting liquid asset status to state govt. bonds

Category: Capital Market


  Read (1852)
CBN releases guidelines for granting liquid asset status to state govt. bonds

THURSDAY, 01 JULY 2010 01:25 BLESSING ANARO  


Three months after the Central Bank of Nigeria (CBN) decided to confer liquid asset status on eligible state government bonds, it has finally issued guidelines to operationalise the decision. With the guidelines, the Securities and Exchange Commission (SEC) is expected to monitor the execution of projects carried out with proceeds from state government bonds. 


The apex bank decided to confer a status of liquid assets on states government so as to allow the bonds issued relative ease in transfer of ownership by way of being traded in an open market.For an asset to be liquid, it needs an established market with enough participants to absorb the selling without materially impacting the price of the asset. There also needs to be a relative ease in the transfer of ownership and the movement of the asset. 


Liquid assets include most stocks, money market instruments, and government bonds. The foreign exchange market is deemed to be the most liquid market in the world because trillions of dollars exchange hands each day, making it impossible for any one individual to influence the exchange rate.  


The central bank, in its guideline also said, for outstanding bonds, an SEC confirmation shall be required. With the guidelines, CBN said the issuance of bonds shall be backed by a law enacted by the State Assembly, specifying that a Sinking Fund fully funded from the consolidated revenue fund account of the issuer be established, and the state government shall have in place a fiscal responsibility law, with adequate provisions for public debt management, in order to enhance investors’ confidence in the issuer. 


The state governments are also expected to have a credit rating at inception and throughout the tenor of the bonds. The credit rating shall be determined by a rating agency registered or recognized by the Securities and Exchange Commission (SEC).The issuer shall provide an Irrevocable Standing Payment Order (ISPO) which shall be payable out of the statutory allocation of the state government and shall be deductible at source. The ISPO, it said shall be approved by the State Assembly. 


The ISPO is a written mandate given by the issuer (State government) of a bond to the Accountant General of the Federation (AGF) authorizing the AGF to deduct, at source, predetermined sums of money from the statutory allocation of the issuer. The CBN also said, issuer shall maintain a fully-funded sinking fund, a fund into which an issuer sets aside money over time, in order to retire its debt instruments. The guideline said it is to be managed by a Trustee registered by the SEC.


The state government in that status is expected to establish a debt management department in order to enhance transparency and the professional management of debt issues.   It said, the state government bonds shall be limited to a minimum maturity of seven years in order to be considered for liquid asset status.


The guideline also expect that the state government bonds shall comply with all the relevant provisions of the Investment and Securities Act (ISA 2007) including amendments thereto as well as SEC’s rules as may be prescribed from time to time. 


(Source:BusinessDay)



Tags: , 



Comment With Your Facebook or Yahoo! ID


Latest news


News on Capital Market

About Us

Who We Are
Our Team & Partners
Corporate Governance
Advertise with Us
Subscribe / Unsubscribe
Site Map
News Feed - RSS
Newsletter
Contact Us
Message from CEO
Resources

News & Features
The Analyst / Market Data
Investor Relations Portal
The Regulator
Economy & Politics
WebTV
Training Portal
Events Calendar
NewsStands - Online Reputation

Products and Services

Research & Market Intelligence
Analyst Services
Offers & Rights Support Service
Investor Relations Services
Alert & Subscription Services
Share Support Services
Proshare Consult
Event & Seminar Coverage
Market Directory
File a Complaint
News & Analysis

#1minNews
News from TheANALYST
Video News from WebTV
Money Market Updates
Opinions & Analysis
Nigerian Economy
Market Data
The Regulator
Newsletters
Discussion Forum
Policy

Subscriber Agreement
Privacy Policy
Data Policy
Disclaimer
Copyright Policy
Trademarks
Comments in Site
Advertising Code
Conflict of Interest
Content Partnership
3rd Parties

Online Trading and Execution
Training
Legal Support Services
Web/Technology Services
File a Complaint