Lagos Borrows N137.3bn from Bond Investors at 13%

By Dipo Olowookere

The Lagos State government has sourced N137.3 billion from bond investors at a coupon rate of 13 per cent per annum.

The funds would be used to address part of the infrastructure deficit in the metropolis, the Governor, Mr Babajide Sanwo-Olu said on Monday.

Some of the projects to receive intervention include 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.

The state government had planned to raise N125 billion from the capital market but due to the high demand for the debt instrument, it was increased to N137.328 billion.

The paper with a maturity of 10 years is the third of the Lagos State’s Series IV N500 billion debt issuance programme. The total amount raised by the state government is now N377.715 billion.

Speaking at a ceremony to sign the documents required by the Securities and Exchange Commission (SEC) to facilitate the exercise, Mr Sanwo-Olu said the oversubscription demonstrates the confidence of investors in the state’s ability to deliver on its infrastructural and socio-economic developmental objectives, while meeting repayment obligations.

He 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.

“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 per cent fixed rate in our Series IV bond issuance under the N500 billion fourth debt issuance programme.

“We set out to raise up 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.

“In line with our vision to build a Greater Lagos, proceeds from this bond will be used to finance infrastructure projects, primarily in roads, environment and healthcare. These projects include 10-km Regional Road in Eti Osa, six-lane Lekki-Epe Expressway, Ijeododo Road in Alimosho and Oba Sekumade Road in Ikorodu. These will contribute to a better quality of living for our people, while also creating a more enabling environment for commercial and economic activity,” the Governor said.

Mr 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.

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, Dr Rabiu Olowo, gave 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.

Mr 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.

“It is fulfilling to note that despite the hurdles that were faced, we have been able to achieve the target we set for ourselves. In fact, we exceeded the target. Many thanks to Mr Governor for his timely intervention at different phases. This is undoubtedly another momentous transaction for Lagos,” he said.

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