Press Releases

Lagos Govt’s N275b Fixed Rate Bond Out Tomorrow

Dec 24, 2008 - The Lagos State Government’s N275 billion Fixed Rate Bond Series, launched in Lagos Wednesday, will be officially open for public purchase from tomorrow.

The State Government launched the first tranche in the series of tranches of the =N=275 billion bond issuance programme, at a Completion Meeting chaired by the Governor, Mr. Babatunde Fashola, SAN, last Wednesday.

Lagos State is issuing the =N=50 billion fixed rate bond of 5 years term being Series 1, 2008/2013. The bond is rated by Agusto & Co and Fitch Ratings, respectively. The State is raising =N=275 billion to finance its capital expenditure in respect of renewing the State’s infrastructure, including major roads, bridges, water transportation, healthcare and education as well as the environment and waste management.

The Fashola Administration has put in place a 10-year business plan which provides for this debt to be serviced and repaid from its internally generated revenue (IGR). The State has provided legal backing to this process through the Lagos State Bonds Law 2008 and the Lagos State Debt Office Law 2008, which provide the legal authority to the Bond Issuance Programme and provide that 15% of the State’s IGR is set aside monthly into a Debt Service Account. This provides a further layer of security and comfort in addition to the Irrevocable Standing Payment Order (ISPO), which would typically be the comfort provided by a State Government.

Lagos State is unique in that it is the only state in Nigeria that generates a significant majority of its revenues internally. This has been achieved mainly through widening the tax net through advocacy and introduction of self-assessment programmes to facilitate voluntary compliance and deployment of information technology to facilitate electronic payment and accountability. This drive requires a continued commitment from citizens of the State to contribute their quota to this growth engine through regular and prompt payment of taxes.

The bond coupon at 13%, provides a relatively attractive rate of return to investors at a time when other investment markets are experiencing great volatility. The bonds will be issued in series on a regular basis over the next 3 years, for terms of 3 years or longer and provides the Lagos State Government with an excellent opportunity to match the medium term nature of its capital assets creation with medium term financing.

In order to provide continuous liquidity to investors in the bond, the Lagos State Government has also appointed 14 banks and discount houses as primary dealer market makers (PDMM), who will ensure that they stand ready to buy or sell the securities at any time, mirroring the Federal Government’s Bonds PDMM structure.

The Joint Issuing Houses to the Lagos State Bond Issuance Programme are Chapel Hill Advisory Partners, Afrinvest, Radix Capital Markets, FBN Capital, FCMB Capital Markets, Skye Financial Services, Stanbic IBTC Bank Plc and Zenith Capital. The =N=50 billion Series 1 is expected to close in January 2009.