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By Ibim Semenitari
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The Rivers State government has received the approval of the state house of assembly to borrow the sum of N100 billion to help fund its infrastructure projects. According to Governor Chibuike Amaechi, the bulk of the loan would be used to make down payments before September 30, for power distribution projects that will ensure uninterrupted power supply in Rivers state by 2012. “Whereas we have more that enough generation capacity, distribution is still insufficient, ' the governor said.

The loan which is being structured by GT bank will come at a cost of 8 per cent and is to be paid back in three years. Governor Chibuike Amaechi says, GT bank's offer is right on time, as it has saved the state the need to borrow from the capital market at 12 percent.

“We are saving four percent on cost of funds with this transaction,” Governor Amaechi said. “With this loan from the GT bank, we will now be seeking to borrow N150 billion from the capital market, depending on our cash inflows,” he said.

The Rivers state government was planning to issue a shelf registration for N250 billion at the capital market. A shelf registration is a procedure that allows corporations or government (as in this case) file one registration statement covering several issues over a period of time. With the “registration on the shelf,” the corporation or entity can go back to the market with minimal procedure up to the limit approved, but often times may not necessarily reach that limit.

However with the N100 billion loan, the Rivers State government will not be taking up the N250 billion bond shelf registration. Also th estate willonly draw down N30 billion of this facility in the first instance. This is in keeping with prudential guidelines, says Chamberlain Peterside, the State's commissioner of Finance. “ The loan facility is a bridge loan that will be accessed if the need arises but only N30 billion will be require now given the single obligor limit rules do apply.”

Rivers received a B+ rating from rating giants, Fitch and Standard and Poors, in 2010. The state's fundamentals are quite strong and its financial outlook stable and promising.

Ibim Semenitari
Commissioner of Information and Communications, Rivers State.