Imo State N20bn Bond, how has this bond issue benefited the Imolites? – By Obinna Zebulon

IMO STATE BOND 2009 MATTER ARISING  

question3As we approach the Maturity date of 30th June 2016 of the Imo State N20bn Bond, how has this bond issue benefited the Imolites?

By definition, a Bond is ‘’A debt security issued by a state, municipality or county to finance its capital expenditures. These bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state in which the bond is issued’’ – Investopedia.

From the foregoing, it will be very safe to say that the issuance of bonds by government authorities is in the best interest of the populace. This is assuming that the CAPITAL EXPENDITURE aspect of the definition is followed religiously. Many States in Nigeria have benefitted greatly from issuing bonds for infrastructural development. States like Lagos in particular has made giant strides in infrastructural development with proceeds from bond issuance.

In a similar vein, we want to x-ray and put in perspective the Imo State government Bond that was issued in 2009 with a maturity date of 30th June 2016.

As an introduction, I have adapted a brief write-up from a publication after the completion board meeting of the transaction by UBA Capital.

UBA Plc and others, Raise N18.5b for Imo State Government.

UBA Capital, the investment banking and asset management division of United Bank for Africa (UBA) Plc, led other financial institutions to raise N18.5bn for Imo State government to help meet its developmental goals.  The issue was the second largest State debt financing in the Nigerian capital markets this year and a clear signal of the depth of investor demand and UBA Capital’s leading role in African capital markets.

UBA Capital acted as Lead Issuer. The other issuing houses involved in the transaction were Stanbic IBTC, Future View Financial Services Limited and BGL Securities Limited.

The N18.5billion bond issue is Series 1 of a N40billion Medium Term bond issuance program of the State. The bond which was fully underwritten opened and closed on Tuesday June 30, 2009. It was issued at Par with a Fixed Rate coupon of 15.5% payable semi-annually. The bond is amortizing, tax exempt and backed by an Irrevocable Standing Payment Order (“ISPO”) on the Federal Allocation of Imo State and will mature in 2016.

Proceeds of the bond financing will be used to finance capital projects in the state. Specifically, the Governor of Imo State, Chief Ikedi Ohakim said proceeds will go into the rehabilitation of water projects, rehabilitation and construction of roads and financing the state equity investment in Imo Wonder Lake and Conference Centre Oguta . The Governor who fielded questions from reporters during the Completion Board Meeting at the Transcorp Hilton Hotel, Abuja at the weekend said upon completion of the projects, the State would have more potential for wealth creation, employment opportunities and poverty eradication. He added that “no State can attain full development by relying on allocation from the Federal purse. There must be an alternative means of raising funds for subtle development, which is what we have decided to do in Imo State with the bond issue” he explained further.

From the above, one would expect that the ultimate goal of the bond issuance as stated by the UBA team would bring about the much needed infrastructural development in the State and also bring about job creation. It is against that backdrop that the Imolites are asking the following questions:

  1. Who were/are the ultimate beneficiaries of the bond issuance?

  2. What role did the regulatory authorities and Parties to the Offer play and where and when does these roles stop?

  3. Who should protect the interest of the people seeing that it is their future that is being mortgaged?

  4. Where is the State post issuance of the bond?

  5. What next?

These questions and others that are not covered here in this article are begging for answers. For a proper understanding of these questions, I will try to expand on each of them and hope that we as Imolites will get answers from the government seeing that the institution of government is a continuum.

Who were/are the ultimate beneficiaries of the bond issuance?

‘’Rehabilitation of water projects, rehabilitation and construction of roads and financing the state equity investment in Imo Wonder Lake and Conference Centre Oguta’’

The above as stated by the governor as the investment points of the funds are in no doubt wonderful ideas for the State. But the question we are asking is, WHERE THESE THINGS DONE? If yes, can we see the proof? And if no, it just means that the investors have become the only beneficiaries in this issuance seeing that their return on investment (ROI) is comprehensively secured by the full weight of the government via the ISPO.

What role did the regulatory authorities and Parties to the Offer play and where and when does these roles stop?

For every Bond issuance being a Capital Market transaction must have the full authorization of the Securities and Exchange Commission (SEC) and all the Issuing Houses involved in the issue must ensure that the Offer is carried out in a very professional manner in line with the approval secured from SEC. That being the case, who should ensure that the monies raised are applied to the things as detailed in document approved by SEC? And when should these oversight function stop?

Who should protect the interest of the people seeing that it is their future that is being mortgaged?

Seeing that the revenue that accrue to a state belongs to the entire people of that State (albeit in theory), when an encumbrance is put on such future stream of revenues for the sake of creating an asset that will return higher ROI in real terms to the people of the State, who within the State government should ensure that these assets are created?

 

Where is the State post issuance of the bond?

As Imolites, we are asking, how far has the State developed in line with the promises made during the Bond issuance? What real value in terms of infrastructure and job creation can we say we have seen since the bond issuance?

What next?

As we all might know, come June 30th 2016, the funds for the repayment of our obligation to the investors would have been secured in a sinking fund account created for that purpose into which the deductions based on the ISPO issued are paid into. By this it is obvious that the investors as we have earlier stated are comprehensively protected and covered.

When these funds are finally repaid, what is next for IMO STATE? Seeing that we might not have gotten the benefit promised from the bond issuance?  Should we just let it be and assume that it is one of those things? Why should a people be subjected to such injustice?

A trip to Wonder Lake and Conference Centre Oguta will surely bring tears to your eyes if you have the interest of this State at heart. Where are the roads? Not to mention the unemployment.

It will be rather irresponsible on the part of any government to take a decision that has a collective impact on the general wellbeing of her citizens only to dash the hope and expectations of such people and nothing is done about it. Someone might be quick to say that ‘’it is the Nigerian system’’ then the real question now becomes FOR HOW LONG SHOULD WE ALLOW THIS IMPUNITY TO LAST?

Back to our focus in this article, my real concern and worry is that we as Imolites might just stay and play the Ostrich as things degenerate from bad to worse with no strategic solution in sight. It is still a wonder how a state like Imo that is endowed with so many sons and daughters of great intelligence can be left to be trailing other states in terms of development. How is it that the only industry we seem to be doing well in is the hospitality business with so many indigenous hotels springing from every nook and cranny?

In conclusion, we demand to know what happened to the money raised for the ‘’Rehabilitation of water projects, rehabilitation and construction of roads and financing the state equity investment in Imo Wonder Lake and Conference Centre Oguta’’

In line with the swagger of this generation, Imolites are saying…..# WHAT HAPPENED TO OUR MONEY…..

Thank you.

Submitted  by Obinna Zebulon

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