BusinessDay

Lekki-Epe road, health top priorities as Lagos raises N137.3bn bond

…oversubscribed by 9.84%

Completion of the ongoing 10-km regional road in Eti-Osa, the Lekki-Epe expressway and critical healthcare infrastructure are top priorities for the Lagos State government, as it announced a successful issuance of a N137.3 billion capital market bond on Monday.

According to a statement by the government of West Africa’s largest city, necessary documents required by the Securities and Exchange Commission (SEC) to facilitate the issuance of 13 percent fixed-rate bond have been signed by the state’s attorney general, issuing parties and trustees of the funds.

“The statutory instruments that will facilitate the raising of N137.328 billion bond by Lagos State government from the capital market to deliver key infrastructure in critical sectors of the economy are now met,” the government said in a document sighted by BusinessDay.

The event marked the third time the Lagos government would be issuing a long-tenure bond of 10 years (2021-2031), bringing to a total value of N377.715 billion bond issued from the Lagos State’s Series IV N500 Billion Debt Issuance Programme.

“Lagos once again marks another milestone in the domestic debt capital markets, with the issuance of the largest bond ever by a sub-national government in Nigeria. The signing ceremony finalises the issuance of N137.3 billion bond at 13 percent fixed rate in our Series IV Bond Issuance under the N500 billion fourth Debt Issuance Programme,” Governor Babajide Sanwo-Olu, said.

The state set out to raise N125 billion from the capital market but closed the bids with N137.3 billion, following oversubscription. The development, Sanwo-Olu said, demonstrated a “strong response” from the investing community and testified to the confidence of investors in the State’s ability to deliver on its infrastructural and socio-economic developmental objectives, while meeting repayment obligations.

Compared to the initial offer of N125 billion, the issuance was 9.84 percent oversubscribed.

The governor said proceeds from the bond would be used to finance key infrastructure projects in healthcare, environment and road construction, including the 10-km regional road in Eti- Osa, six-lane Lekki-Epe expressway, Ijeododo road in Alimosho and Oba Sekumade road in Ikorodu, among others.

Sanwo-Olu said the iconic projects for which the funds would be earmarked would contribute to a better quality of living for the residents, while also creating a more enabling environment for commercial and economic activities.

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“We set out to raise to N125 billion, but we closed the book with bids totalling N137.3 billion. This is a strong response from the investing community to our administration’s debut bond issuance. This humbling achievement is a testament to continued investors’ confidence in the state’s ability to deliver on its infrastructural and socio-economic developmental objectives, and also to meet repayment obligations,” he said.

Sanwo-Olu said there had been multiplier effects in socio-economic activities felt from the previous intervention capital raised justified the cost of investment in critical sectors. He said Lagos had maintained high discipline on the size and pricing of its bonds, noting that the State got the clearance to proceed with the issuance as its coupon of 13 per cent yearly fell within the acceptable clearing bid.

The governor disclosed that the issuance process started in April based on the advice of the State’s transaction advisers. With the issuance of the third bond, Sanwo-Olu said the imperative to aggressively drive his administration’s THEMES agenda had been boosted; pledging to deliver more iconic projects would raise the value of the State’s economy.

He applauded the Federal Ministry of Finance, SEC, National Pension Commission (PENCOM) and Debt Management Office for supporting the State’s infrastructure drive.

Commissioner for finance, Rabiu Olowo, gave a summary of the bid book in respect to the bond, pointing out that 319 bids were submitted during the offer period, while total bids at N146.328 billion value were received.

Olowo said N137.328 billion qualified under the terms of the offer at the clearing price of 13 per cent per annum.

“In April 2021, we accelerated an ongoing conversation on the need to quickly intervene on the huge infrastructure gap in the face of limited financial resources. We took advantage of the favourable investment climate in the capital market to initiate a bridge to finance transaction by redeeming and refinancing the existing bonds,” he said.

The state attorney-general and commissioner for justice, Moyosore Onigbanjo, represented by the permanent secretary, Titilayo Shitta-Bey, said members of the state executive council, in the December 20, 2021 meeting, approved the resolution of the Government to issue the bond.

Representative of the 24 issuing parties and managing director of Chapel Hill Denham, Kemi Awodein, described the bond as a “landmark transaction” and the largest to be issued by a non-federal government entity.

She said all the issuing parties stood boldly behind the Lagos government to realise its development objectives for which the bond was facilitated.

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