Lagos Assembly approves Governor Sanwo-Olu’s special bond request of 85 billion naira
The Lagos State House of Assembly approved Governor Babajide Sanwo-Olu’s request to access a special N85 billion bond market bond to fund investment projects in the state.
The state legislature also approved the governor’s request to collect a loan from a commercial bank at an interest rate of 9.25%.
The granting of the approval was disclosed by House Finance Committee chairman Rotimi Olowo to House of Assembly correspondents in Lagos on Tuesday, according to a report by the Nigeria News Agency ( NOPE).
Olowo said there are two aspects to the governor’s request, namely the request for approval of a bond bridge loan that would allow the state to enter the bond market as soon as possible and the second was a loan from a bank. trade at a very low interest rate of 9.25. %.
He said the House quickly approved the governor’s request as it was about implementing infrastructure development in the state, adding that there could not be a better time than now for the State opts for the bond market which it called Special Dispensation Bond. .
What the House of Representatives Finance Committee says
Olowo explained that in February of this year, the federal government entered the bond market at a coupon rate of 12%, noting that this rate had risen to 13.5% by June of this year.
While recalling that in 2016 and 2017, the state government secured bonds between 16.6% and 17.25% respectively, the lawmaker said that the market currently offers sufficient opportunities for the state to access the bond at a lower rate since the current government bond would mature in 2024.
Olowo said: “When you look at our Debt Consolidation Account (CDSA), we have around 22 billion naira and we are talking about 101.2 billion naira in the next two or three years.
This will be a lot of pressure on our debt so what we thought was needed to get into the bond market quickly with House approval so that we can get it at a lower rate and that will be for 10 years with two years of moratorium.
This means that for the next two years after we get the deposit, we won’t pay any money. We will not pay the interest and the principal, it will be like a tax holiday. This will relieve the state of the burden of finding money to pay creditors.
On the second aspect, if today we do not access the commercial loan from one of the banks at a single digit rate of 9.25%, we will be the losers because we will still have to pay the holders of the bond. ‘here in the next few months.
This means that we will have been able to save money worth an average of 1.5 billion naira in the form of fundraising so that we can earn until 2023. “
What you should know
It can be recalled that in January 2020, the Lagos State government made financial history by announcing the issuance of a 100 billion naira Series III bond, as part of its program of 500 billion naira bond issue.
The program is Lagos State’s third bond program; the state that previously issued bonds under the 107.5 billion naira and 167.5 billion naira programs.
At the end of the Book Build, the bid to issue bonds up to N100 billion was 196.5% oversubscribed. the strong reaction to the current administration’s first bond issue is a testament to the continued investor confidence in Lagos State and the state’s strong credit profile.
The N100 billion bond is the largest bond issue in our domestic capital markets by a subnational government, and this issue is only the second time that a 10-year instrument has been issued by a non-sovereign issuer. Lagos State issued the first 10-year bond in 2017.