Lagos State Government on Wednesday held a Completion Meeting for its N87.5 billion Programme 2 Series 2 Bond rounding off its N167.5 billion Issuance Programme.
The offer recorded a stellar 139 per cent total subscription of N121.72 billion which the state did not accept, given the limitation of the programme size and the state’s disciplined approach to financial management.
The Bond, which represents another landmark by the state given that it is the largest Bond Issuance ever completed by a sub-national in the history of the Nigerian capital markets, cleared at a coupon of 13.5 per annum.
Speaking at the Completion Meeting which took place at Lagos House, Ikeja, Governor Babatunde Fashola (SAN) said he felt truly proud and vindicated by the show of confidence of the investing public, stating that the latest issuance represented a closing down of the 6 year old N275 billion debt issuing Programme of the State which was aimed at satisfying the needs of the 21 million residents of Lagos and allowing them achieve their dreams.
“The closure of this facility takes us to the end of that Debt Issuance programme. We started first with N50Billion, then N57 bilion, N80 billion and closing it now with an N87 billion bond”, he stated.
The governor stressed that despite the fact that the Bond issuance recorded an offer of N121.7 Billion; the State Government cannot take the excess and will limit herself to the N87.5 billion which is what her resources and plans can support and pay back.
He expressed delight that all of the investments are locally raised saying it is one of the strongest statements of self belief that Nigeria can send to the world and expressed the hope that the Bond issuance will not end with Lagos.
“It is a statement of confidence that is rooted in hope and belief. In the fullness of time, other states will become deserving of this kind of investment because the projects we commit them to will last beyond the tenure of our government”, he added.
Fashola stated that with about 18 months precisely left for his administration to pass on the baton, the administration has still approached the market to raise money to execute many of the life changing projects that it has committed to such as the Okokomaiko to Marina Light Rail project, Adiyan Waterworks, Lagos Badagry Expressway, Apapa CBD Road Networks, Mushin Isolo Road, Isolo-Isheri-Ijegun Link Bridge, Ayinke House Maternity Hospital and the Atlantic Shoreline protection project.
The governor said all of the projects have started with trickles that are being collected monthly and emphasized that the voluntary tax payers are the true champions of the development of Lagos with their tax payments.
He expressed the optimism that all those who are still outside the tax net would have a change of heart by deciding to contribute to the commonwealth by paying their taxes when due.
Speaking on the faithful implementation of the State Budgets, the governor said it represents the article of faith for any serious government and is the compass that guides the ability of any government to meet the aspirations of its people.
He recalled that last year, Lagos State closed the budget at 89 per cent which was an unprecedented achievement that happened because the State was able to put together all the financing that were necessary to implement the programmes that were drawn into the Appropriation Law passed by the State House of Assembly and coupled with the taxes paid by very hardworking residents of the State and allocations from the centre.
He explained that for the first since the advent of this administration, it recorded a drop in the third quarter performance of the 2013 Budget as compared to the second quarter performance which was largely due to the issue of public finance accounting as the standard has always been to have an improvement of a new quarter on the preceding quarter.
The governor reiterated his commitment as stated during the presentation of the 2014 Budget to ensure that during the final quarter of the 2013 fiscal year, he would do everything possible to ensure that the final quarter is better than the third quarter.
Against the backdrop of recent frequent reports about missing funds at some other levels of government, the Governor said the amount of paperwork and documentation done in connection with the bond issuance is a testimony to the accountability of the state government.
“Now perhaps on a lighter note, before coming here I have signed about 74 documents. How much do we need to raise?, N87 billion and it is in this same market that money has been reported to have disappeared and I always asked who dropped the ball. Money disappeared into the hands of people who have no responsibility for security, for education and no responsibility for job creation and health care. So if those of us on this side of the divide have signed documents, we welcome it because it means the professionals are doing their work. Like I have always said if professionals do their work properly things would be a lot better. What is happening here today is not an accident”, he stressed.
The governor also educated some armchair critics whom he described as voodoo economists and scaremongers who have never managed anything successful let alone a stable economy reminding them that no investor will lend money to a bad debtor.
“The fact that you are here and supporting this government is not an act of charity but a statement of confidence in the financial discipline, economic management of the government and the policy choices for the future,” Fashola said.
He buttressed the fact with the point that when the State first raised a bond of N25 billion in 2002 and drew down N15Billion of it, the voodoo economists shouted from the rooftops that the Government had mortgaged the people’s future and that of their children for 50 years.
Continuing, he noted that such critics fail to come back and report that the Bond was repaid fully within a year of assumption of the present administration and also failed to tell the people that projects like Kudirat Abiola Road, Akin Adesola Road, Yaba-Lawanson/Itire Road, Awolowo Road, Ikoyi for which the loans were taken are still there after the loan has been repaid.
“What they will also fail to tell you is that the interest payments on the loan constitute income to the lenders from which salaries are paid to keep people in employment, support families of employees of most lending institutions and the economy going. I will however tell you that the N50Billion Bond we took in 2009 will mature in February 2014 and as at today; there is already N94.6Billion in the Consolidated Debt Service Account under the Trustees to the lenders to repay the debt next year”.
“This is almost double of what we owe that is due for repayment; and the account continues to grow to meet our existing debt obligations as they fall due for payment”, the governor explained.
He added that those who cry wolf about borrowing to finance public infrastructure are always comparing Nigeria to America and Europe and the quality of life over there but are oblivious as to why those economies are successful and prosperous.
“They will never tell you that America has a national debt of over $17 trillion. They will not tell you that the wonderful facilities in Dubai are funded by sensibly contracted debts, invested in life changing investments such as are doing in Lagos”.
“Distinguished Ladies and gentlemen, this ship of this state has sailed steadily and progressively for over six years. Al the managers are working hard with me to keep her focused to berth safely at her next port in May 2015 when a new captain crew will take over,” he stated.
Speaking earlier, the Vice Chairman of the Managing Partner of Chapel Hill, Mr Bolaji Balogun, commended the State Government for its bold initiative in the market adding that the issuance represents the largest single issuance ever by any sub national government.
He added that even when the State issued an N80Billion Bond last year, it was also the largest.
Also speaking at the historic occasion, Finance Commissioner Ayo Gbeleyi said, ‘’we are quite pleased with the level of subscription as it validates Lagos State’s reputation as a responsible issuer in the capital markets. Additionally, it shows the level of support and confidence placed in the administration of Mr. Babatunde Raji Fashola (SAN) and its commendable efforts to improve the quality of infrastructure within the state in order to foster development, sustainable economic growth and the eradication of poverty for the overall well-being of the residents of Lagos State. The proceeds of this issuance will further add fillip to the vision of making Lagos State Africa’s model megacity and global economic and financial hub”.
The bonds, concluded at such a competitive coupon of 13.5% at this point in time, given the current money market conditions with Monetary Policy Rate (MPR) retained at 12% and recent increase in Cash Reserve Ratio (CRR) from 12% to 50% for public sector deposits, amongst others further demonstrates the strong commitment of Banks and Institutional Investors like Pension Fund Administrators (PFAs), Insurance Companies and Fund Managers to the laudable programmes of the Administration.
Highpoints of the Completion Board Meeting were the presentation of Debt Issuance Programme Documents to all the representatives of the State Government and the eventual signing of the documents after the verification of Issuance questionnaire by the representatives of the State Government.
Prominent among those who attended the ceremony were the Deputy Governor, Mrs Adejoke Orelope-Adefulire, the Chairman of the House of Assembly Committee on Finance, Hon Funmi Tejuosho, the Attorney General and Commissioner for Justice, Mr Ade Ipaiye, members of the State Executive Council, representatives of the Issuing Houses, stockbrokers, receiving banks and joint trustees to the State on the Bond.
