Why States Will Not Leverage the Debt Market for Financing - Prof. Uche Uwaleke


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High debt profile and low internally generated revenue (IGR) are part of the reasons some States cannot access the Nigerian Debt Market for financing.

Professor Uche Uwaleke, a lecturer in Capital Market Studies at the Nasarawa State University, Lafia, made this point at the recent Capital Market Correspondents Association of Nigeria, CAMCAN forum.

According to Uwaleke, the debt market is a veritable source of long-term financing that States could leverage to address their funding challenges.

He observed that states with strong and stable internally generated revenues (IGRs) would normally feel comfortable taking advantage of the local medium to long-term fixed-income debt market. Such states, he noted, would attract investors comfortable with the states' superior credit rating and repayment capacity. This, he said, explains why many states have not used the capital market as would be expected.

Speaking from experience as a former Commissioner of Finance in Imo State, Uwaleke noted that robust economic strategies and plans that are bankable and can generate funds for the state are critical to states' capacity to mobilize longer-term financing and competitive market rates.

Looking at the year 2021, Uwaleke advised states to be proactive and strategic in exploring how they could liberalize/commercialize state assets, and corporations through the capital market.

He noted that several states were comfortable with short-term loan facilities for financing key projects aside from loans from regional and international financial institutions. This placed heavy burdens on finance costs and state revenues.

The scholar called for monetary policy measures that would discourage states from concentrating on short-term money market instruments to finance capital projects.

According to the Securities and Exchange Commission (SEC) Nigeria's sub-national entities (states) have raised roughly N900bn from the debt market since 1976.

Some of the prominent states that have accessed the debt market include; Lagos, Ekiti, Ogun, Osun, Delta, Edo, Ondo, and Kogi amongst a few others.

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