SEC Cautions against Indiscriminate Issuance of Debt Instruments by Subnationals

Oluchi Chibuzor

The Securities and Exchange Commission (SEC) has urged Capital Market Operators (CMOs) in Nigeria to review the proclivity of issuance of debt instruments by both state and local government agencies.

Executive Commissioner, Operations, SEC, Mr. Bola Ajomale stated this at the 2024 International Credit Rating Webinar organised by DataPro Limited.

 A statement by the Business Development Manager of DataPro, Mr. Kehinde Rasheed quoted Ajomale, who represented the Director-general of the commission Dr. Emomotimi Agama as saying,  “Irrevocable Standing Payment Orders (ISPOs) from the state government cannot be the only measure of assurance and risk mitigation, CRAs must alter their measurement metrics to accommodate rising risk levels and increasing requirements for sustainability for any instrument raised by a State or quasi-government body.”

Ajomale, who identified the tendency for some state governments to issue private bonds guaranteed by the state government, pointed out that the processes do not have any proof of secondary market value and that they need to be assessed for the delivery of the stated project objectives.

The fourth in the series, the webinar was attended by over 500 participants drawn from Nigeria, USA, Canada, South Africa, Ghana, Gambia, Namibia, Kenya, and Rwanda.

In his welcome address, DataPro’s Founder, Mr. Abimbola Adeseyoju described the Webinar as a veritable vehicle to propagate the value propositions of the credit rating institution in Nigeria and the rest of Africa. According to him, apart from the established role of providing an opinion on the quality of Assets and Capital, Credit Rating Agencies also serve as a complement to risk management procedures, adding that CRAs should serve the common goal of catalysing the economy, promoting the real sector and creating wealth for a sustainable society.”

 In his speech, the Keynote Speaker at the event, Christian Ruehmer, an accomplished international banking entrepreneur urged banks to support businesses in the real economy. Ruehmer believes rating agencies and banks share a common goal in ensuring that businesses succeed.