By Joshua Olalekan, Lagos
Lagos State Commissioner for Finance, Mr. Akinyemi Ashade has said that the state government will issue another N60 billion bond before the end of this year out of the N500 billion bond it has.
Ashade disclosed this while answering questions from reporters at the state Annual General Meeting (AGM) of bond series 1, 2 and 3 as well as rating programme, the state debt issuance programme which took place at the Civic Centre, Victoria Island on Friday.
He disclosed further that by the time the state House of Assembly approves the 2017 budget the government hopes to issue another N100 billion bond next year.
“We are issuing a bond this year, we have established a N500b programme, that is essentially like a shelf, its a limit and it will be taken as the state House of Assembly approves, we will be taking them in bits. So the first tranche will be a N60 billion that we are going to issue this year out of the 500 billion that we have. And by the time the next budget is also approved by the House of Assembly we hope to do N100 billion next year”, Ashade said.
According to him, the state decided to issue bonds for investors to invest, “it is part of our sustainable debt issuance programme. We’ve realised that for us to fast track the infrastructural development of our state we need some level of deficit financing especially when we do our budget.
“Deficit financing means when you realise that we need much more fund to finance the infrastructure and those fund may not come as quickly as we want the funds to come, so on a medium to long term we believe the funds will come because of the strength of our internally generated revenue.
“However, to fast track that, we have to do what we call deficit financing. And on the strength of our IGR we will be able to pay back over time. We can quickly use those funds to finance the infrastructure that Lagosians want. And that is why we’ve gone to the bond market in the past and we will still go into the bond market very soon”, he said.
Speaking on what the bond would be used for, the commissioner said, “we have quite a lot of infrastructure that we want to finance in the state, we want to facilitate water transportation, we need to do channellisation of all the waterways, channellisation is just like building roads on water so that the people can be able to move freely.
“We are also embarking on EGIS, land automation so that we can capture all the lands, we will know who owns what and it can also aid property taxes and also security of our state. We also have some of our schools that need renewal, some of our hospitals also need renewal.
“We believe that if we are able to raise the first tranche of N60b it will support some of the roads we are doing including, the flyover in Ajah and Abule Egba; we are currently using our funds, but really we can just do as much for now, we will need that kind of deficit financing to be able to complete those things. Some of them should be ready for our 50 years anniversary. So that is the plan and we so much believe that if we can raise that before the end of this year, it will go a long way to fast track the development of our state”, Ashade said.
According to him, the Securities and Exchange Commission (SEC) is currently checking some of the projects to authenticate them and “they will soon finish their session, and we hope that their report will go in by next week, so that we can open very soon”.
In his opening remarks earlier, the commissioner said, the need for the state to continuously strive to increase its revenue base to meet the needs and aspiration of its over 24million people which has placed a lot of stress on infrastructure in the state “informed the decision to borrow the bonds taking into cognisance the state’s strong internal revenue base and its superb debt management structure”.
Adding that the bond series which the state government started in 2008 has had tremendous impact on the socio-economic development in the state and positively affected the life of the people.
“The state government has continued to manage and recently restructured two of its outstanding bonds making for better management of its debt profile”.
Speaking on the bond series 1, 2 and 3, Ashade said the funds raised from each issue is being used to finance annual investment commitments specified in the capital budget and also key infrastructure project that cut across various sectors like: healthcare; roads/bridge construction; works and infrastructure; environment; housing; education; water; agriculture; transportation; LAMATA; waterfront infrastructure and refinancing of existing obligations.
The commissioner appreciated and commended the state bond holders for believing in the state government and supporting the change, informing them that the “funds raised from the programmes and series maturing in 2017 is being used to finance the development projects in critical sectors of our state”.
Ashade also thanked the Joint Trustees for their prudence in ensuring the integrity and security of government bonds obligation through the management of the sinking fund.
Present at the AGM were representatives of Securities and Exchange Commission (SEC), Nigeria Stock Exchange (NSE), Joint Trustees to the Lagos State Bond Issuance programme which includes: FBN Trustees Ltd; STL Trustees Ltd; United Capital Trustees Ltd; Union Trustees Ltd; CSL Trustees Ltd; Radix Trustees Ltd; and Sterling Asset MGT and Trustees.