Lagos Issues N137.3bn Fixed-rate Bond To Bridge Infrastructural Gap
Respite has come for residents of Lagos especially those in areas with deplorable road conditions following the issuance by the state government of a N137.3 billion at 13 percent fixed rate Series IV Bond.
This particular issuance is Lagos’ third long-tenure bond of 10 years (2021-2031), bringing to a total value of N377.715 billion bond issued from the State government’s Series IV N500 Billion Debt Issuance Programme.
The proceeds from the bond will be deployed to key infrastructure projects in healthcare, environment and road construction, including the 10-km Regional Road in Eti Osa, six-lane Lekki-Epe Expressway, Ijedodo Road in Alimosho and Oba Sekumade Road in Ikorodu, among others.
Speaking on Monday at a ceremony where necessary documents required by the Securities and Exchange Commission (SEC) to facilitate the issuance were signed by the State’s Attorney General, issuing parties and trustees of the funds, Governor Babajide 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.
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 also, a testimony to the confidence of investors in the State’s ability to deliver on its infrastructural and socio-economic developmental objectives, while meeting repayment obligations.
With this development, Lagos has once again marked another milestone in the domestic debt capital markets, issuing 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, the Governor said.
Increasing the bond from N125 billion with bids totalling N137.3 billion shows a strong response from the investing community to the Sanwo-Olu 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.
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.
According to the governor, 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 be raise the value of the State’s economy.
The Governor 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, in summary of the bid book, pointed out that 319 bids were submitted during the offer period, while total bids at N146.328 billion value were received, adding that N137.328 billion qualified under the terms of the offer at the clearing price of 13 per cent per annum.
Olowo said: “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.”
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 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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