Ogun state government is going to capital market to raise N250 billion through bond issuance, public offering, book building, among other instruments to fund 3-year medium-term expenditure framework which has between 60% and 70% benchmark for capital expenditure.
This follows the negative impacts of dwindling revenue from federal accounts, internally generated revenue and other receipts due to the twin shocks from crude oil earnings and economic impacts of COVID-19.
The N250 billion credit which serves as ready-made financial buffers to finance capital projects – 60% for 2020; 65% for 2021 and 70% for 2022, following the State House of Assembly’s approval to the State to access the credit facility under its 3-year medium-term expenditure framework programme to serve as reproductive debt to stimulate the economy. It will be accessed in tranches of N100 billion in 2020; N100 billion in 2021 and N50 billion in 2022.
Governor Dapo Abiodun-led Government had prepared N449.97 billion budget for 2020 fiscal year, voting N271.2 billion for capital expenditure and N178.8 billion as recurrent expenditure under the state designed 3-year medium-term expenditure framework that benchmarks 60%, 65% and 70% for capital expenditure in the fiscal years of 2020, 2021 and 2022, respectively. While inflation rates pegged at 10.2%, 8.49% and 6.59% respectively for 3 years and gross domestic product contributions stand at 2.4% of N2.99 trillion for 2020; N3.06 trillion for 2021 and N3.14 trillion 2022.
To fund the 2020 budget and beyond, the sources of budget finance included N255.946 billion of IGR – 57% of the budget; N43.431 billion of Statutory Allocation – 10%; N22.031 billion VAT – 5%, and N129.566 billion of Capital and other Receipts – 28%; but the current realities in the World economy necessitated extraordinary financial buffers which pilot the first fiscal estimates in the 3-year medium-term expenditure framework series, firstly with the legislative approval to refinance N109 billion debt stocks left by former administrations and secondly, with the approval to access N250 billion credit from capital market.
Meanwhile, the approval to access N250 billion on the floors of the State House of Assembly on Thursday in Abeokuta was adopted by Committees of the Whole House following the Resolution of the House of Assembly, entitled “H.R: No. 067/OG/2020- Request for Bond Issuance, Public Offering or Book Building to the tune N250 billion which was moved by the Majority Leader, Yusuf Sheriff, seconded by Jemili Akingbade and supported by all the lawmakers through a voice vote at a plenary presided over by Speaker Olakunle Oluomo.
BusinessDay reports that the Assembly’s decision was in line with Governor Dapo Abiodun’s request for approval to access the credit facility communicated to the State House of Assembly last month and read on Thursday at the plenary with a focus on the 3-year medium term financial framework which would be carried out in tranches of N100 billion only on annual basis, through any of bond issuance, public offering, book building or such other methods as may be approved by regulatory authorities, while access to other tranches were subject to further approval of the State House of Assembly, spanning three fiscal years of 2020, 2021 and 2022.
Explaining further on the necessity of the loan, Chairman, House Committee on Finance and Appropriation, Olakunle Sobukanla noted that due to the economic challenges occasioned by COVID-19 pandemic, the State needed to access the financial instruments with a very low interest rate to further the infrastructural development of the State.
Also, the Speaker, Olakunle Oluomo stated that upon receipt of the request, the State House of Assembly had engaged relevant government agencies with an assurance on the desirability of the facility as the approval of the financial intervention would help sustain the State’s economy amid the economic downturn caused by the pandemic and volatile prices of crude oil leading to the drastic reduction in the allocations from federal accounts, internally-generated revenue and receipts.
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