State Govts’ Capacity to Honour Bond Obligations Worries SEC

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The acting Director General of the Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, has expressed concern over the ability of state governments to honour their bond obligations to investors on the back of tumbling oil prices, which have impacted on the revenue accruable to the states.

He said: “It is an issue we need to look at closely especially with a view to protecting investors which is ultimately our major responsibility.”

Speaking in Abuja at the weekend while receiving executive members of the Association of Corporate Trustees, who paid him a courtesy visit, the SEC boss however reassured bond investors of its commitment to act in their best interest at all times.

He was speaking amid concerns in some quarters that the plunge in crude oil prices could affect the ability of state governments to meet the repayment terms under the Irrevocable Standing Payment Order (ISPO) required for state bond approvals.

The ISPO is an important instrument that gives bond investors comfort, as funds are deducted at source from states’ Federation Account allocation and transferred to a sinking fund from which investors are paid their coupons.
Gwarzo further assured the trustees that SEC, with the support of the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, would insist on the sanctity of the ISPO, considering the impact the arrangement has so far had on the domestic bond market.

He also underscored the urgency for state governments to diversify their revenue base to end their over-reliance on crude oil and earnings and in order to meet obligations while achieving the developmental objectives for their people.

On her part, president of the Association, Funmi Ekundayo congratulated the DG of SEC on his recent appointment and commended the commission’s leadership for its various initiatives aimed at developing the capital market.

She also assured the SEC management of the association’s continuing support and cooperation as a trade group in the quest to move the market to the next level.

She said: “Our role as protectors of the investor cannot be overemphasised. In compliance with our responsibilities within the trust deed we ensure that investors are always protected and repaid as and when due. We are happy with the support you give us which has continued to strengthen investors' confidence in the market.”

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