The Securities and Exchange Commission (SEC) has called on capital market operators (CMOs) in Nigeria to reassess the issuance of debt instruments by state and local government agencies. This recommendation was articulated by Bola Ajomale, SEC Executive Commissioner for Operations, during the 2024 International Credit Rating Webinar organized by DataPro Limited on October 10, 2024.
Ajomale emphasized that Irrevocable Standing Payment Orders (ISPOs) from state governments should not be the sole assurance and risk mitigation measures for debt instruments. He stressed that Credit Rating Agencies (CRAs) must adapt their evaluation metrics to account for rising risk levels and increasing sustainability requirements for any debt issued by state or quasi-government bodies.
He raised concerns about some state governments issuing private bonds backed by the government, highlighting that these instruments often lack secondary market value and require thorough assessment to ensure they meet the objectives of the projects they are intended to finance.
Participants at the webinar were encouraged to explore the pivotal role of CRAs in fostering sustainable economic development in Nigeria. This event, the fourth in its series, attracted over 500 participants from Nigeria and various countries, including the USA, Canada, South Africa, Ghana, Gambia, Namibia, Kenya, and Rwanda.
In his opening remarks, DataPro’s Founder, Abimbola Adeseyoju, underscored the webinar’s objective to promote the value of credit rating institutions in Nigeria and Africa. He noted that in addition to evaluating asset and capital quality, CRAs should enhance risk management processes while contributing to economic growth, particularly in the real sector, to promote sustainable wealth creation.
The keynote speaker, Christian Ruehmer, an established international banking entrepreneur, urged banks to focus on supporting businesses in the real economy, reinforcing the need for collaboration between financial institutions and businesses to drive sustainable development.