Indications at the weekend were that the Niger State Government (in Nigeria's North Central geo-political zone) may have concluded plans to access fresh funds from the capital market.

The state, which will, therefore, join two others - Lagos and Imo - in the sub-national debt market, hopes to raise N6 billion through a fixed rate redeemable infrastructure development bond 2009-2014 at N1 per unit.

A source close to the deal hinted Daily Independent that the offer is part of the strategic move by the Aliyu Babangida Muazu administration to better the lives of the state's indigenes.

Specifically, the source noted, the government hopes to utilise the fund in the provision of road network across the state, aside from developing other critical infrastructure needed to enable Niger State fight poverty, while achieving its Millennium Development Goals, among others.

Documents for the bond issue have since been submitted to the Nigerian Stock Exchange (NSE), the source explained, since the bond would be listed for trading. It was not known, as at press time if the issue has been approved by the Quotations Committee of the exchange and when the offer is billed to open.

The urge for sub-national and national bond, according to analysts, is expected going by the current global turmoil that has negatively impacted on commodity prices, including oil, including crude oil, Nigeria's major revenue source. The influx of governments to the capital market for funds, the argument continues, is to make up for the short-fall in revenue from the Federation account.

Before approval is given by the capital market apex regulator for any State Government to source fresh funds, the Federal Government is required to approve such by issuing a mandatory Irrevocable Standing Payment Order (ISPO). Such approval enables the regular deduction of certain amount from that due to the state into an escrow account to cover for the half yearly interest and repayment at the end of the offer.

The move by Niger State is also in line with indications that the sub-national bond market would become vibrant again, about four years after activities ceased following allegations that state governors were abusing the opportunity.

The Imo State Government, earlier in the year, announced plans to access the market for N40 billion that would be tied to developing critical infrastructure in the state- specifically opening up the state through road network.

Imo State Governor Ikedi Ohakim announced during the commissioning of the state's branch of the NSE is the first tranche of its proposed N200 billion development initiative for issuance in soon.

Speaking with journalists later, Ohakim lamented the situation where state governments shy away from the capital market for infrastructure development funds that would defray their cost on the long-run.

This, he continued, arises from thinking in some quarters that bonds would plunge the coming administrations and generations into debt, since the repayment mode is spelt out at the beginning, aside from that the proceeds will be expended in verifiable projects for the benefit of the populace.

Basking in the euphoria of its very successful N50 billion bond issue, plans are afoot by the Lagos State Government to return to the market for another tranche.

Analysts hinge the success of the first tranche of the state's offer to several initiatives by the state, including the impressive coupon (interest) rate of 13 per cent and the appointment of 15 primary dealers/market makers, most of whom play the same role for the FGN bond issue to enhance liquidity of the bond. They are: Afribank Nigeria, PlatinumHabib Bank, Ecobank Nigeria, Fidelity Bank, First Bank of Nigeria, First City Monument Bank, First Securities Discount

House, Guaranty Trust Bank, Intercontinental Bank, Nigeria International

Bank Limited, Oceanic Bank International, Stanbic IBTC Bank, Sterling Bank, United Bank for Africa and Zenith Bank.

The success has also been attributed to the 10-year business plan put in place by the state to provide for repayment and debt servicing from its Internally Generated Revenue (IGR). Others include the offer's A+ and AA (National), BB- (Long-term International) rating by Agusto & Co. and Fitch respectively. Also, apart from providing an ISPO and setting aside 15 per cent of its monthly IGR for debt servicing.

The state Commissioner for Finance, Rotimi Oyekan, explained that the bond issuance is necessitated by government's determination to provide infrastructure not minding the current global financial crisis.

Oyekan noted that the debt issue was the state's way of finding a structured method of financing its infrastructural programme, adding that it was premised on a three-year capital budget plan which, according to him "is approximated to a deficit financing programme of N275 billion."

The bond should not be confused with tax, he continued, noting that while the bond is an investment opportunity with returns to the investors, tax remains statutory responsibility of the people to government. He warned that realising its responsibility to the state's 18 million people, the administration will not compromise its position on tax payment.

"We are offering the public an opportunity to invest their money and reap handsome rewards at 13 percent interest that the bond offers. Tax is what every income earning person is expected to compulsorily pay to the government so they are two different things. The financing allows us the opportunity of investing N250 billion on the average in the infrastructural renewal project over the next three years," he said.