Lagos seals N100bn bond deal for infrastructure financing
Lagos State government on Wednesday leaped forward in its quest to bridge the state infrastructure gap, as it signed the N100.33 billion infrastructure bond to be sourced from capital market to fund infrastructure and pressing capital projects.
At a signing ceremony held at the Banquet Hall at the State House in Alausa, Governor Sanwo-Olu, investors and issuing parties put the final ink on the over-subscribed Series Three Bond Issuance of N100 billion, which was issued and raised by the State under its N500 billion Third Bond Programme approved four years ago.
The governor, who was visibly excited by the financial intervention, declared the moment as “historic and new journey” for the state in its drive to provide requisite infrastructure to catalyse its economy, saying it was the largest bond programme ever embarked on by any sub-national entity in the country.
Sanwo-Olu said: “We have embarked on a new journey that is not meant to serve our personal interest, but to activate more prosperity for our dear Lagos and give our people the hope for better tomorrow we all dreamed. When we came into Government, we made commitment to all Lagosians that we are coming to pursue and implement an agenda that will build our capacity to achieve ‘Greater Lagos’ we all will be proud of.
“Today, I am standing in from you all to say we are writing the financial history of Lagos in another chapter and it will bring good dividends to all residents. With this N100 billion bond, we will ensure that all Lagosians feel the direct impact of this intervention in their homes and on the roads. We are bringing new infrastructure and repairing the existing ones, including bridges and hospitals. We are going to renovate schools and build new ones for our children; slums will be regenerated and pressing environmental issues will be solves. We are going to make people feel the essence of governance.”
Sanwo-Olu recalled that the effort to raise the bond started some three months ago with a simple discussion with professional partners led by Chapel Hill Denham. He observed that the State almost missed the opportunity, as the statutory period recommended by Securities and Exchange Commission (SEC) to raise such bond was closing when the State started pushing for the bond issuance.
The Governor said the partners staked their time and energy for the State to secure essential requirements to access the capital for the bond. Within a period of three months, Sanwo-Olu said the partners helped Lagos to restructure its balance sheet and reduce the State’s interest expense by N17 billion, which gave Lagos the opportunity to raise the bond from the capital market.
He said: “Less than three months down the line, we are celebrating the biggest sub-national bond issuance today and the team of partners has also helped us to restructure our entire balance sheet. We have been able to revert the entire borrowing of Lagos from very high rate to acceptable numbers. The team has also helped us to reduce interest expense by N17 billion, which made it easy for us to approach the financial market.”
Sanwo-Olu promised not to betray the confidence of investors that subscribed to the bond, pledging that the funds would be disbursed strictly to finance infrastructural projects required to boost the State’s economy.
Commissioner for Finance, Dr. Rabiu Olowo, said the State accelerated the bond programme in response to the need to close “huge infrastructural gap” in the face of limited financial resources available to the State. He said the State Government took the advantage of favourbale investment climate in the capital market to issue the “Series Three” of its bond programme to raise the money.
He said: “The cost of inaction would have been huge and it would mean over 20 million Lagosians would be underserved in many areas. It was, therefore, with this mandate that Lagos Government sought the support of professional advisers to access the capital market in December 2019.
“It is fulfilling to note that, despite hurdles we faced, we have been able to achieve the target we set for ourselves. In fact, we exceeded the target. I want to assure all residents that the proceeds from this bond issuance programme will be judiciously utilised in line with our T.H.E.M.E.S agenda to achieve a ‘Greater Lagos’.”
Managing Director, Chapel Hill Denham, Bolaji Balogun, described the bond as a “jumbo” for the State, stressing that the support given to Lagos Government by the capital market was unprecedented.
Balogun noted that Lagos issued a bond of N100 billion, adding that the Minister for Finance granted the approval for the process while in transit.
Lagos, he said, must accelerate investment in infrastructure, adding that such would create an incredible multiplier effect on economic activities and give the State financial buoyancy. Sustained investment in infrastructure, Balogun said, remained the only way to achieve irreversible development and lift millions of people out of poverty.
A total of 315 bids were submitted during the offer period for the Lagos Series Three Bond Issuance, putting the value of the total bids at N196.48 billion. A total of 208 bids, which amounts to N100.33 billion, qualified under the terms of the offer at the clearing price of 12.25 per cent per annum.
Nigeria’s commercial capital, Lagos State launched the third series of its N500bn debt issuance programme earlier in as it seeks to raise up to N100bn for financing physical and social infrastructural development projects in the state.
The issue was rated Aa-(GCR) by Agusto & Co although the issuer which is Lagos State Government is rated A+(GCR).
Lagos state launched the first tranche of series I in December 2016 when it issued N60bn.
The government raised N97.34bn in the series II which was issued in four tranches. In August 2017, the first two tranches of N46.37bn were issued as a 7-year bond priced at 16.75 percent for Tranche 1 maturing in August 2024, and the Tranche 2 which is a 10-year bond of N38.77bn priced at 17.25 percent will mature in August 2027.
The government raised N6.9bn and N5.3bn in tranche III and tranche IV respectively in January 2018.
JOSHUA BASSEY & SEGUN ADAMS