With the ongoing multi-billion naira blue-line rail project, Lagos-Badagry express road redesign and expansion, Lekki-Epe express road modernisation, protection of the Atlantic Ocean shoreline running through Goshen Estate and Alpha Beach and phase II of the Adiyan Water Works which is to deliver 70 million gallons of water per day, among other projects making steady progress in Lagos, Ayo Gbeleyi, commissioner for finance, says the bond programme undertaken by the government is hitting the target of delivering life-changing projects in the state.
He spoke at the first annual general meeting (AGM) of the N87.5 billion bond programme II, series II which is to mature in 2020, saying there lies the justification for the state’s decision to have approached the market for the funds.
The N87.5 billion bond is the final tranche of the state bond programme totaling N275 billion.
The Lagos bond series began in 2009 with the issuance of N50 billion in tranche one (fully redeemed in February this year), followed by N57.5 billion in 2010 in tranche two of same series which is expected to mature in 2017. Under series two of the bond issuance, the state in 2012 raised N80 billion in tranche one, which is maturing in 2019, and eventually sealed the deal in 2013 when it raised N87.5 billion last tranche of the series two which is to mature in 2020. They were all oversubscribed in what analysts say represents investors’ confidence in the state economy.
Gbeleyi told BusinessDay at the AGM that the bond proceeds targeted at bridging the long infrastructural deficit in Lagos have been prudently managed by the Babatunde Fashola led government, expressing the confidence that the incoming administration from May 2015, would continue from where the current administration would let off.
Speaking on the debt profile of Lagos which runs into billions of naira, the commissioner said there was no cause for alarm as the state remains buoyant to finance its debts. According to him, three rating agencies including Augusto, GCI and Fitch have continued to rate bond and the state’s financials in the positive, an affirmation of the sustainability of its economy.
Gbeleyi said the Fitch rating released September 19, this year, did not only affirm the state’s robust and prudential financial management, but also upgraded its long term rating from AA+ to AA+ stable.
“You will recall in February this year, we fully redeemed the first tranche of our bond series of N50 billion. In the local market, Agusto rating has consistently issued us a debt rating of AA+. In terms of international benchmark and debt sustainability ratio, as prescribed, either under the Fiscal Responsibility Act, the Federal Government debt office or the World Bank policy programme, we have always consistently come out atop”.
Highlighting some of the statistics, Gbeleyi said the debt service revenue ratio prescribed by the World Bank is 30 percent and pegged at 40 percent by the Federal Government Debt Management Office, saying the state government has consistently, over the last five years, operated below 20 percent.
“In terms of our debt to revenue we have maintained it at 80 percent over the last five years, whereas the benchmark is allowed to go as 250 percent. The debt to GDP ratio stands today at about 2.8 percent compared to the 20 percent World Bank prescription for the emerging economies. Our net end position projected to December this year will stand at about N450 billion net of about N95 billion that would have been accumulated in the sinking fund towards bond retirement and debt service.
