The Lagos State government, in south west Nigeria, is to raise 80 billion Naira (about US$ 53 million) bond, described by financial analysts as the highest by any Nigerian state government so far, PANA reported here Thursday.
This followed its agreement with a consortium of capital market operators at a Completion Board Meeting on Thursday.
“Remarkable, you know this is the largest ever issue by any state government in this country. It’s almost 23 billion Naira larger than the previous large issue which is also by Lagos state,” a representative of the joint issuing houses and book runners to the deal, Bolaji Balogun, told journalists shortly after the deal was struck.
The nine leading issuing houses involved in the deal are Chapel Hill Denham, Zenith capital, Radex, Stanbic IBTC Bank Plc, First bank Capital, Vetiva, Skye Finance Service, AFR invest West Africa Ltd and FCMB capital.
A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt. It is also a financial instrument used to raise long-term fund to finance developmental projects.
The 80 billion Naira bond is the “first series one bond issuance”, issued under the 167,500,000 debt issuance programme. It has a 14.5% interest repayment rate with maturity date in November 2019.
This is the fourth time the Lagos state government is raising bond, making it the only state among the 36 states that have consecutively accessed the capital market, as a window of opportunity to raise additional capital.
Its first bond was raised in two tranches in 2008. The third one was in 2010 and the fourth in 2012.
The state Governor, Mr. Babatunde Fashola, at the meeting said the proceeds from the bonds would be channelled into the completion of critical key projects that will impact positively on the residents of the nation’s commercial capital city.
Fashola said: “In a lay man’s term, it means that the Lagos state government is doing what governments around the would do. Borrow money to address today’s challenges and wait to repay through taxes that are collected. There are roads to be fixed, drainages to clear, schools to build, hospitals, ferries, rail transport and all of that.
Parts of the proceeds from the bond would go into financing the 10-lane Badagary expressway, the multi-billion naira blue light rail from Badagary to Marina, the Lekki–Ikoyi coastal bridge, water supply, roads, schools, hospitals and other infrastructures.
The bulk of the Nigerian bond market is being dominated by the Federal Government bond, as very few state governments and local governments access the bond market to finance their infrastructural challenges.