Lagos State has commenced the issuance of bonds as part of its N1 trillion Debt and Hybrid Instruments Issuance Programme (DAHI Programme). The bond issuance documents provided to investors by ARM Securities indicate that the state plans to raise N100 billion through Series I. Interested investors have until May 12, 2023, to apply for the offer.
According to the Lagos State Government, the funds generated from this offering will be utilized to support vital social and physical development projects across the state.
ARM Securities, in a communication to investors, highlighted that Lagos State is one of Africa's fastest-growing markets and will rank as the fourth largest city on the continent in 2021. The city accommodates more than 65% of Nigeria's industrial capacity, and it is home to major Nigerian banks, top-tier companies, and transnational corporations. Additionally, Lagos State serves as a major trade port, generating 50% of Nigeria's port revenue from three lighter terminals and two seaports, making it an attractive destination for foreign investors.
Agusto & Co and GCR have assigned Lagos State an AA- long-term rating, which signifies a stable outlook. This rating reflects the state's strong financial position, flexibility, suitable expenditure profile, and ability to generate significant cash flow from internally generated revenues (IGR). Lagos State's IGR constitutes over 70% of its total revenue, with N573 billion generated in 2021 out of a total revenue of N771 billion, according to ARM Securities.
The current offer has a tenor of ten years, and the pricing ranges from 14.875% to 15.250%. It features a security term structure in the form of an Irrevocable Standing Payment Order (ISPO) and a Consolidated Debt Service Account (CDSA), funded by the state's internally generated revenue. The minimum unit of sale for interested investors is N10 million, with increments of N1 million thereafter. The bonds will be listed on the Nigerian Exchange Limited (NGX) and the FMDQ Securities Exchange Limited.
Investors should take note that the repayment of the bonds will follow an amortized principal repayment schedule after a 24-month moratorium. The subscription for the offer is based on the book build method, and the coupon basis is a fixed rate with semi-annual payments, as stated in the offer documents.
Over the past ten years, Lagos State has allocated more than N3 trillion to infrastructure development within the state. The emphasis on infrastructure development plays a crucial role in promoting economic growth, enhancing the state's financial capacity, and attracting further capital, according to the offer documents.
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