The Lagos State House of Assembly said it approved the state government’s request to issue fresh bonds and take a bank loan because of the relief it would bring to the state.
Governor Babajide Sanwo-Olu had asked the state legislators to approve a N85 billion special dispensation for bond redemption and for bridge loan.
In a statement, the Chairman of the House Committee on Finance, Rotimi Olowo, said the request by Sanwo-Olu would ensure the sustenance of the ongoing capital projects in the state.
“Based on briefing and documents received, the redemption of bonds will allow for extension of maturity of the same with a two years moratorium in 2031.”
Olowo noted that the request from the governor was for “an approval of bond for a bridge loan which will allow the state to access the bond market, while the second aspect is a loan from a commercial bank at the interest rate of 9.25%
“What it means is that, in the next two years, after securing the bond, we will not pay any money. We will not pay the interest and the capital; it will be like a tax holiday. It will relieve the state of the burden of sourcing for money to pay the creditors.
“When you look at our Consolidation Debt Service Account, we have about N22 billion and we are talking of 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 is that we should quickly access the bond market so that we can get it at cheaper rate and it will be for 10 years with two years moratorium,” he added.
“On the second aspect, if today we don’t access the commercial loan from one of the banks at a single digit of 9.25 perceent, we will still be losing because what we will still access, we will pay the holders of the bond between now and the next one month.
“That means we have been able to save money worth an average of N1.5billion in form of seeking fund to be able to make up to 2023.
“So, if we don’t pay that in the next three years, what it means is that we have gotten a saving of about N75 billion. It is obvious that there cannot be a better time for the state to go for the bond market which we called ‘Special Dispensation Bond’ and the second is a loan from a commercial bank at the interest rate of 9.25 which is very cheap.
“That is the reason why the Assembly speedily supports the executive. We always want to support the executive when it comes to infrastructure,” Olowo said.
The bonds issued by the state in 2016 and 2017 were secured at between 16.6 percent and 17.25 percent.