The Association of Issuing Houses of Nigeria (AIHN) recently hosted its annual Investment Banking Awards in Lagos, a gathering that celebrated the resilience of the Nigerian capital market amidst significant economic headwinds.

While the event highlighted broad industry achievements, it also set the stage for a critical conversation on how Nigerian states can leverage these markets for development.

Resilience Amidst Economic Headwinds

Opening the discourse, Kemi Awodein, President of the AIHN, lauded the tenacity of Nigerian companies. She noted that despite the tough economic conditions of 2024, firms remained undeterred in seeking capital for expansion, mergers and acquisitions, and debt issuances.

The Role of Investment Banking in National Development

Representing the Lagos State Governor, the Commissioner for Finance, Abayomi Oluyomi, emphasised the strategic role of investment banking in shaping the economy. He reiterated Lagos State’s commitment to improving the ease of doing business and encouraged investment banks to design products that support sustainable projects and expand opportunities for Nigerian youths.

Digitalisation and Municipal Bonds

Adding a perspective on market evolution, Jude Chiemeka, CEO of Nigerian Exchange Limited (NGX), highlighted how digitalisation has shortened issuance timelines and boosted retail investor participation from under 300,000 to nearly 850,000. Crucially, Chiemeka welcomed the Securities and Exchange Commission’s (SEC) move towards securitisation and municipal bonds—a development set to deepen long-term financing options for sub-nationals.

A Template for Sub-national Borrowing

Against this background, the Rating Brief team had a conversation with Mr. Rotimi Oyekan, CEO of Phoenix Global Capital Markets Limited and former Commissioner for Finance in Lagos State.

The seasoned financial expert broke down the often overlooked but critical factors that determine successful borrowing at the state level—from aligning debt with future revenue streams to adopting transparent practices.

Why Many States Still Prefer Bank Loans

According to Mr. Oyekan, Sub-national governments would rather have bank loans… for reasons of avoidance of transparency, costs and accountability for project completion.

However, he argued that bonds offer regulated issuance costs, clearer project timelines, and mandatory disclosures that enhance investor confidence and governance quality.

Transparency, Structure, and Discipline

Oyekan emphasised that a well-functioning capital market provides visibility into the true cost of government projects and ensures funds are utilised as intended.

“When you raise money from the capital market, you are accountable to explain what you spent the money on. The SEC will inspect the projects. Transparency is enhanced,” he explained.

Lagos as a Case Study: The Power of IGR-Backed Borrowing

Citing Lagos State as a pioneer, Oyekan recalled his tenure as Finance Commissioner: “I created the first shelf registration for subnational capital market debt. Before I left office, it was a ₦275 billion programme.”

He noted that Lagos remains the only state raising debt instruments based on the sustainability of its Internally Generated Revenue (IGR), a strategy he urges other states to emulate to ensure borrowing is strategic and sustainable.

Borrowing Today, Backed by Tomorrow’s Revenue

Oyekan further argued that debt sustainability cannot be divorced from revenue reforms. With Nigeria on the brink of significant revenue expansion driven by tax reforms expected to take full effect by 2026, he challenged the common criticism of debt accumulation.

“When you borrow today, you are only spending what you expect to earn tomorrow. Critics are not asking: What is your expectation for next year?” he posited, insisting that a forward-looking mindset separates reform-driven governments from the rest.

The Missing Link: Development Plans

Ultimately, Oyekan’s advice to sub-nationals is simple: financing must rest on a plan. “All sub-nationals must have a development plan. It is the strength of the plan that finance rests on,” he stated, noting that investment bankers can only structure effective instruments when states articulate clear, multi-year development strategies.

Conclusion

The consensus from the AIHN Award Night is clear: from the resilience of corporates highlighted by Awodein to the structural templates advocated by Oyekan, the path to economic recovery lies in a transparent, disciplined, and innovative capital market. For sub-nationals, the tools for sustainable development are available—provided they are willing to embrace the rigorous planning and accountability the market demands.