Press Releases

Why We Floated N50 Billion LASG Fixed Rate Bond Series - Fashola

Dec 24, 2008 - Lagos State Governor, Mr. Babatunde Fashola (SAN), Wednesday explained the rationale behind the floating of a Fixed-Rate Bond Series by the State Government, saying it was meant to fund the massive infrastructural renewal programme currently going on in the State.

The N50 billion bond, which is already in the investment market, is the first tranche of the total N275 billion five to seven year tax-exempt Infrastructure-Related Bond which the Government recently registered with the Securities and Exchange Commission (SEC).

Speaking at the Completion Board Meeting for the launch of the Bond Series held at the Federal Palace Hotel, Victoria Island, Governor Fashola also assured Lagosians that the launch of the Bond was the only way to make Lagos, which he described as the magnet of Nigeria , to continue to function.

“Our resolve to renew the infrastructure of Lagos is predicated on the belief that it is the only way to unleash the potential of this truly blessed State. It is the only way to make this magnet of Nigeria continue to function and accommodate the aspirations of the 18 million and growing population who have decided to make the State a destination of first choice”, the Governor said.

He recalled that the State Government had to embark on the bond process because it recognized a gap between its foreseeable resource and plan, adding that the State Government, thereafter, got approval from the State House of Assembly to raise the money “in a way that only a legitimate government can, through borrowing”.

“We recognized that there was a gap in our budget (2008) between our foreseeable resource and our plan and we got approval to raise money in a way only legitimate government can, through borrowing”, the Governor said, adding, “The State House of Assembly approved the process that we are completing today for raising money from the public”.

According to him, “The Bond has received very high reviews, the ratings have been high. The elements could not have conspired better today. At a time when interest rate is at an all time low in other economies, this bond assures a rating of 13 per cent. In many ways than one, we have made Lagos an investment haven for the whole world”.

On the specific projects to which the bond would be committed, Governor Fashola named provision of water for the growing population, waste management, provision of Educational infrastructure, roads, transportation to be able to move people and goods from one part of the State to the other, and funding of Security , among others, as the critical components for which the proceeds from the bond would be utilized.

The Governor commended his predecessor in office, Asiwaju Bola Ahmed Tinubu, for providing the foundation on which his administration now stands, recalling that it was the immediate former Governor who issued the first Structured Status Bond in 2002.

“At that time too, cynics made allegations that the future of Lagos had been mortgaged for 50 years”, the Governor said, noting with delight that the bond has now been fully retired.

He described as most commendable the vision that engendered the bond, adding that what was achieved with the N15 billion bond in 2002, would probably not be achievable today with N50 billion as a result of rising price.

Also recalling the criticisms received by his administration after the presentation of the 2008 budget, Governor Fashola declared, “Those who said we were conservative did not give us an alternative means to fund the budget and of course, those who said we were ambitious did not provide details. But we were ready to work with our dreams and with our vision”.

The Governor also commended the State Executive Council whom he said conspired behind him to christen the 2008 Budget, the Great Leap Budget, adding that although they did that without his consent, “Today, I publicly ratify that conspiracy, because Lagos has, indeed, taken a great leap after twelve months of implementing that budget”.

Urging Lagosians to pay their tax when due, Governor Fashola declared, “This bond signifies a true democratization of the polity of Lagos, because the only way to repay it is through recourse to taxation. The continued increase in internal revenue generation is the only way those who have bought into our vision will get paid”.

On the proposed new National Policy on Taxation, Governor Fashola warned that taxation capabilities should not be nationalized, adding that each of the 36 States of the Federation must be allowed to focus on their taxing powers in respect of their residual powers where they have primary responsibilities to their people.

“The 36 states that make up corporate Nigeria are diverse and unique in their various resources, in their various challenges and in their various capabilities. They do not have the same problems. So while reform on taxation, collection and management is welcome, we must respect the diversity of these states”, he warned.

Earlier, in his welcome address, the State Commissioner for Finance, Mr. Rotimi Oyekan, explained that the Debt Issue was Lagos State’s response to the need to find a structured method of financing its infrastructural Programme, pointing out that the programme was premised on a three-year capital budget plan which, according to him “is approximated to a deficit financing programme of N275 billion”.

“The financing allows us the opportunity of investing N250 billion on the average in the infrastructural renewal project over the next three years”, the Commissioner said, adding that the uniqueness lay on the fact that the State had scored a major first in that the bond is the first sub-national registered bond issuance programme.

It is the only bond in the market that has the same credit rating as a Sovereign Bond”, he said.

Also present at the Completion Board Meeting were the Deputy Governor, Princess Adebisi Sosan, some members of the State House of Assembly, the Attorney General and Commissioner for Justice, Mr. Supo Sasore and some other members of the State Executive Council, top government officials, Consultants and representatives of the Issuing Houses as well as the Nigerian Stock Exchange, among others.