The Lagos State House of Assembly has approved Governor Babajide Sanwo-Olu’s request to borrow N85 billion to fix Lagos infrastructure.
Mr Sanwo-Olu requested the loan, ‘Special Dispensation Bond,’ to finance capital projects in the state.
The Chairman, House Committee on Finance, Rotimi Olowo, disclosed the approval to journalists on Tuesday.
Mr Olowo said the request from the governor included a request for approval for a Bond Bridge Loan which will allow Lagos to access the bond market as soon as possible and a loan from a commercial bank at the interest rate of 9.25 per cent.
He revealed that the lawmakers speedily approved the governor’s request since it was to implement infrastructure development in the state.
The Lagos lawmaker explained that as of February, the federal government went to the bond market at a coupon rate of 12 per cent, and by June, it had increased to 13.5 per cent.
Mr Olowo recalled that Lagos had in 2016 and 2017 secured bonds for between 16.6 per cent and 17.25 per cent.
He said, “When you look at our Consolidation Debt Service Account (CDSA), we have about N22 billion, and we are talking N101.2 billion in the next two or three years.
“It will amount to a lot of pressure on our debt obligation, so what we thought is necessary to quickly access the bond market with the approval of the House so that we can get it at a cheaper rate, and it will be for 10 years with two years moratorium.”
The lawmaker said that meant “in the next two years after securing the bond, we will not pay any money” and “we will not pay the interest and the capital,” like tax holiday.
He further explained, “It will relieve the state the burden of sourcing for money to pay the creditors. On the second aspect, if today we don’t access the commercial loan from one of the banks at a single-digit rate of 9.25 per cent, we will be losing because we will still have to pay the holders of the bond between now and the next months.”
