Gov. Liyel Imoke of Cross River on Monday in Calabar said his administration floated a N40 billion bond to address specific financial matters in the state.
Imoke’s explanation through a statement by his Chief Press Secretary, Mr Christian Ita, followed complaints by some residents in the state against the action of the state government on the matter.
According to the governor, the bond is not a fresh debt as being misconstrued in some quarters, but a deliberate policy at freeing the state of its current debt burden.
“The bond issued by the Cross River State Government is an application to recapitalise subsisting debts in the state. It is not a fresh bond to raise fresh loans.
“It is meant to renegotiate the existing debt and spread the repayment period over a reasonable time and free up the state from numerous debt accruing from 2002 when the first bond was issued.
“The first bond ever issued by the state government was in 2002 when the first Bond Law was passed to enable the state government to borrow funds to finance the Tinapa project.
“Since the 2002 state borrowing by bond, a lot of interest has accrued to the state in Federation Account, thereby, limiting the state’s capacity to raise funds to bridge the funding gap in the state annual budget,’’ he stated.
He said that the current bond of N40 billion was a compilation of past debts arising from the 2002 bond and subsequent state borrowing now being recapitalised and renegotiated with lower interest rate and longer payment period.
“The government has presented the request for the recapitalisation of the debt by bond through a procedure.
“The request was first presented to the state executive council and was approved; the approval was sent to the state House of Assembly for a resolution to support the bond
“The request to the House of Assembly was backed by a law to amend the State Bond Law and a Debt Management Law,” the governor said.
He added that the state finances had been in danger due to the fact that the 2002 Bond was issued without the required debt management framework.
According to him, the 2002 Bond was limited to N4.5 billion while the borrowing exceeded that amount by 2005 without amending the State Bond Law and providing a debt management strategy for the debts.