Delta State Debt Management Law, 2021(1)

DELTA STATE DEBT MANAGEMENT LAW, 2021

1. Short Title and Commencement. This Law may be cited as the Delta State Debt Management Law, 2021.

2. Commencement. In this Law unless the context otherwise requires: "Borrowing" means any financial obligation from: (i) any loan including the principal, interest, fees on such loan; (ii) the deferred payment for property, goods or services; (iii) bonds, debentures, notes or similar instrument; (iv) letters of credit and reimbursement obligations with respect thereto; (v) trade or bankers' acceptances; vi) capitalized amounts of obligations under leases entered into primarily as a method of raising financial or of financing the acquisition of the asset leased; (vii) agreements providing for swaps, ceiling rates, ceiling and floor rates, contingent participation or other bedding, mechanisms with respect to the payment of interest or the convertibility of currency; and (viii) a conditional sale agreement, capital lease or other title retention agreement; "Capital Expenditure" means spending on an asset that lasts for more than one financial year and expenses associated with the acquisition of such assets; "Commission" Means the Commissioner for Finance; "Concessional Terms" means the terms of the loan, which must be at an interest rate not exceeding 3%; "Consolidated Debt" means the aggregate of the outstanding financial obligations of Government including those of its Parastatals and Agencies/Commissions at any point in time arising from: (i) borrowed money including principal interest fees on such borrowed money; (ii) The deferred payment for property, goods or services; (iii) bonds, debentures, notes or similar instruments; (iv) letters of credit and reimbursement obligations with respect thereto; (v) Guarantees; (vi) trade or bankers acceptances; (vii) capitalized amount of obligations under leases entered into primarily as a method of raising financial or of financing the acquisition of the asset leased; (viii) agreements providing for swaps, ceiling rates, ceiling and floor rates, contingency participation or other hedging mechanism with respect to the payment of interest or the convertibility of currency; and ix) a conditional sale agreement, capital lease or other title retention agreement. "Contracting Debt" means the signing or execution giving effect to any financial obligation arising from: (i) any loan including principal, interest, fees on such loan (ii) the deferred payment for property, goods or services; (iii) bonds, debentures, notes or similar instruments; (iv) letters of credit and reimbursement obligation with respect to; (v) trade or bankers' acceptances; (vi) capitalized amounts of obligations under lease earned into primary as a method of raising financing the acquisition of the leases; (vii) agreements providing for swaps, ceiling rates, ceiling, and floor rates, contingent participation or other hedging mechanisms with respect to the payment of interest or the convertibility of currency; and (viii) a conditional sale agreement, capital lease or other title retention agreement. "Cost-benefit analysis" means an analysis/model that compares the cost of undertaking a service, project or programme with the benefits that citizens are likely to drive from it; "Constitution" means the 1999 Constitution of Federal Republic of Nigeria (as altered); "Debt Funds" means a fund that invests in bonds, or other debt securities; "Debt Instrument" means tools or documentation utilized for the purpose of borrowing money, obtaining loans or obtaining debts; "Financial Year" has the meaning ascribed thereto in the Constitution; "Fiscal Policy Objectives" the goals set by Government for attainment of set targets for a given period; "Fiscal Responsibility law" mean Delta State Fiscal Responsibility Law at any given time; "Government Owned Company" Statutory Corporation, Agency/Commission, or a Company in which has controlling interest; "Governor" means governor of Delta State of Nigeria; "House" means Delta State House of Assembly; "Minister" means the Minister for Finance, Federal Republic of Nigeria; "Ministry of Finance" means Delta State Ministry of Finance; "Public Debt Securities" means public debt represented by securities issued by the State Governmen (including those of Central Bank of Nigeria) and Local Government; "Quarter" means one quarter of a financial year and quarterly shall be construed accordingly; "Refinancing of debt securities" means issuance of securities to repay existing debt; "Tax Revenue Projections" means the projected collectible tax or revenue within a particular planning period.

3. Establishment of Debt Management Department. (1) There is hereby established for State Management Department in the Ministry of finance. (2) The Management Department (DMD) shall have the primary responsibility of managing the State's debt portfolio and all debts related matters.

4. Functions of the Debt Management Department. The functions of the Debt Management Department shall include the following: (a) advise on all debt instruments that the State may desire from time to time and give credible and professional advice; (b) maintain a reliable and current hard copy and, more importantly, an electronic database of all debt instruments issued loan taken or guaranteed by the State Government or any of its Agencies and all contingency liabilities related to it; (c) prepare and submit to the Government, a forecast of loan service obligation for each financial year and the available threshold allowance that can professionally be further accommodated within international best practices. (d) prepare and implement a plan for the efficient management of the State's debt obligations at sustainable levels, compatible with desired economic activities for growth and development; and participate in the negotiation and process of borrowing with the aim of ensuring that funds are borrowed at the best favorable terms and conditions for the State Government; (e) verify and cause the servicing of all debts guaranteed or taken by Government; (f) advise Government on guidelines for managing financial risks and financial exposure with respect to all loans and any other debt instruments; (g) advise the Government on the restructuring and refinancing of all debt obligations at all times; (h) advise Government on the terms and conditions on which funds are to be borrowed; (i) submit to the Government, for consideration in the annual budget, the status of State debt portfolio and a forecast of the State borrowing capacity for every year's budget; (j) prepare a schedule of any other Government obligations, such as trade debt and other contingent liabilities and provide advice on the policies and procedures for their management; (k) establish and maintain relationships with international and local financial institutions, creditors and institutional investors in the debt market; (l) collect and collate data on debt management and disseminate information to all stakeholders; (m) maintain the State's debt recording and host same on the website; (n) verify on quarterly basis, compliance with the limits and conditions for borrowing by the State and each Local Government in the State; (o) advise the State Government on the issuance and management of State's loans as prescribed under any law and upon such terms and conditions as may be approved by the State Executive Council; (p) ensure the management of the Debt Fund of the State as established by this Law; and (q) do such other things which in the opinion of the Department, relate to the proper management of the debts of the State.

5. Appointment of Director and other Staff of the Department. (1) There shall be a Director of the Debt Management who shall: (a) be a person not below the rank of an Assistant Director on SGL 15 in the Civil Service of the State and who shall be knowledgeable in and planning matters; (b) be responsible to the Ministry of Finance for policy direction and the day to day administration and of the Department; and (c) possess a minimum of five (5) years’ experience in debt management matters. (2) Staff of the Department shall: (a) be drawn from the mainstream of the Civil Service either by posting, transfer or by secondment; and (b) possess either a University degree, Higher Diploma, or Ordinary National Diploma qualifications in management with relevant discipline or Social Sciences.

6. Establishment of the Management Team. There is hereby established for the Department a Management Team which shall: (a) Comprise the Director and the Heads of Unit of the Department; and (b) under the direction of Director, shall be responsible for the implementation of the policies of Ministry of Finance for the day to day administration of be Department and, in particular, all debt instrument held or to be undertaken by the State.

7. Responsibility for Contracting Debt. The responsibility for borrowing or contracting on behalf of the Delta State Government under this Law shall be vested in the Ministry of Finance.

8. Framework for Debt Management. (1) The framework for management during any financial year shall be based on the following rules: (a) the State Government and each Local Government Council shall only borrow for capital expenditure and human development, provided that such borrowing shall be on concessional terms with low interest rate for external debt; and the prevailing CBN rate for internal debt and with a reasonably long amortization period subject to the approval of House; (b) the State Government shall ensure that the level of public debt as a proportion of State income is held at a sustainable level as prescribed by the House from time to time on the advice of the Commissioner for Finance; and (c) notwithstanding the provisions of subsection (1)(a) of this Section and subject to the approval of the House, the State Government may borrow from the capital market. (2) Non-compliance with the provisions of this Section shall make the action taken unlawful and voidable.

9. Limits on Consolidated Debts. (1) The Governor shall, within 90 days from the commencement of this Law, and with advice from the Commissioner, subject to approval of the House, set overall limits for the amounts of debt of the State and Local Governments pursuant to the provisions of item 7 and 50 of Part I of the Second Schedule to the constitution and the limits and conditions approved by the House, shall be consistent with the rules set in this Law, Fiscal Responsibility Law and the fiscal policy objectives in the Medium Term-Fiscal Framework. (2) Outstanding judgement debts not paid shall be part of the consolidated debts for the purpose of application of the respective limits set in pursuance of this section. (3) For the purpose of verifying compliance with the limits specified pursuant to this Section, the Delta State Fiscal Responsibility Commission shall, at the end of each quarter, determine the amount of the consolidated debt of the State Government and each Local Government. (4) The Commission shall publish, on a quarterly basis, a list of the Local Government in the State that have exceeded the limits of consolidated debt, indicating the amount by which the limit was exceeded. (a) be drawn from the mainstream of Service either by posting or by secondment; and (b) possess either a University degree, Higher Diploma, or Ordinary National Diploma qualifications in management with relevant discipline or Social Sciences. (5) Where at the end of any quarter the consolidated of the State or Local Government exceeds the respective limits, it shall be brought within the limit, not later than the end of the three subsequent quarters, with a 25 percent minimum reduction in the First quarter (6) Violators of the limits specified under this Section shall: (a) be prohibited from borrowing from internal or external sources, except for the refinancing of existing debts; (b) debt within the established limit by alia, restricting funding accordingly. (7) Where non-compliance with the limit specified pursuant to this Section persists after limited by subjection (5) of this Subsection, the affected tier of Government shall be prohibited from receiving grants from any source. (8) Whenever the fundamentals of the proposals referred to in Section are changed due to economic instability or changes in monetary or exchange policies, the Governor shall submit to the House a request for a review of the current limits.

10. Servicing of External Debts. (1) Servicing of external debts shall be the direct responsibility of the Government that incurred the debt. (2) The cost of servicing State Government guaranteed loans shall be deducted at source from the share of the debtor Local Government from the State Account.

11. Conditions for Borrowing. (1) The State Government or its Agencies/Commission and Corporation and Local Government Councils in the State desirous of borrowing shall specify the purpose for which the borrowing is intended and present a cost benefit analysis detailing economic and social benefits of the purpose to which the intended borrowing is to be applied. (2) Without prejudice to subsection (l) of this Section, each borrowing shall comply with the following conditions: (a) the existence of prior authorization in the Appropriate Law for the purpose for which the borrowing is to be utilized; and (b) the proceeds of such borrowing shall solely be applied towards long-term capital expenditure. (3) Nothing in this Section shall be construed to authorize borrowing in excess of the limits set pursuant to Section 9 of this Law. (4) The Fiscal Responsibility of the Commission shall verify, on a quarterly basis, compliance with the limits for borrowing by the State and each Local Government in the State. (5) Without prejudice to the specific responsibilities of the House, the Ministry of Finance shall maintain comprehensive, reliable and current electronic database of internal and external public debts, guaranteeing public access to the information.

12. Lending by Financial Institutions. (1) All banks and financial institutions shall request and obtain proof of compliance with the provisions of this part before lending to be State. (2) Lending by banks and financial institutions in contravention of this Part shall be unlawful and void. (3) Notwithstanding the provisions of this Part, all Banks and Financial Institutions requiring to lend to the State and Local Governments or any of their Agencies shall obtain the prior approval of the Minister.

13. Power of the Governor to grant Guarantees. (1) Subject to the provisions of this Part, Governor may with the approval of the Executive Council, grant guarantees on behalf of the State Local Government in the State. (2) Any guarantee granted by the Governor shall be conditional upon the provision of a counter-guarantee in an amount equal to a higher than the guarantee obligation, provided that, there are no overdue obligations from the requesting Local Government in the State to the guarantor and its controlled Corporations and such guarantee shall also be in compliance with the following terms: (a) counter-guarantee shall also be accepted from the Local Government; and (b) The counter-guarantee required by the State Government from the Local Government, may consist in the appropriation of tax revenue directly collected and resulting from statutory transfers and the guarantor shall be authorized to retain such revenue and use the respective amount to repay overdue debts. (3) In the case of foreign currency borrowing, the State Government guarantee shall be a requirement and no Local Government or State Agency/Commission/Corporation shall, on its own borrow externally. (4) Any guarantee provided in excess of the debts limits set pursuant to subsection (2)(a) of Section II of this Law; shall be unlawful and void.

14. Use of Government Securities as Collateral. Government securities, provided that they are duly listed on the Nigerian Stock Exchange, may be offered collateral to guarantee loans or other financial transactions under this Law for their economic value as defined by the ministry.

15. Power of the Governor to make Regulations. The Governor shall in addition to any other powers conferred on him under this Law, make regulations generally for the purposes of carrying into effect the provisions of this Law.