Nigeria’s largest sub national government, Lagos State, has commenced the issuance of bonds under the LASG’s N1 trillion Debt and Hybrid Instruments Issuance Programme (DAHI Programme). Under the current offer, which is Series I, the Centre of Excellence will be raising as much as N100 billion, the bond issuance documents sent to investors by ARM Securities have shown. Application for the offer closes on May 12, 2023.

Lagos State Government says the proceeds of the offer will be used to finance priority physical and social infrastructure projects across the state.

Lagos State is Nigeria’s commercial nerve centre and its biggest state economy, with its gross domestic product estimated at N26.6 trillion. Its GDP grew at a compounded annual growth rate of 11 percent from 2017 to 2021, thus accounting for 15 percent of Nigeria’s GDP.

“Lagos State is among the 10 fastest-growing markets in Africa (and was ranked the 4th largest city in Africa in 2021) accounting for the location of more than 65% of Nigeria’s industrial capacity. The headquarters for most Nigerian Banks are in Lagos as well as top-tier companies and transnational corporations.

“The State is strategically positioned as a major trade port – with 50% of Nigeria’s port revenue being generated in Lagos from 3 lighter terminals and 2 seaports – and a first-choice destination for foreign investors,” ARM Securities stated in a note to investors.

The state was assigned an AA- long term rating, translating to a stable outlook by Agusto & Co, and GCR respectively.

“This represents an upgrade from the previous A+ rating, given the State’s resilient financial condition, robust financial flexibility, suitable expenditure profile and very strong cash-generating capacity to meet local currency obligations in a timely manner from Internally Generated Revenues (IGR). Lagos’ IGR is over 70% of the State’s total revenues. In 2021, the State generated total revenue of N771bn, including IGR of N573bn,” ARM Securities added.

The tenor of the current offer is ten (10) years just as its pricing ranges from 14.875 percent to 15.250 percent. The offer has a security term structure in the form of Irrevocable Standing Payment Order (ISPO), and Consolidated Debt Service Account (CDSA) funded from the state’s internally generated revenue.

For interested investors, the minimum unit of sale is N10 million and multiples of N1 million thereafter. The offer documents show it will be listed on the Nigerian Exchange Limited (NGX) and the FMDQ Securities Exchange Limited.

Interested investors should also note that redemption or repayment is through amortized principal repayment following a 24-month moratorium. The offer for subscription is by means of book build while the coupon basis is fixed rate and semi-annually, the offer documents show.

“Over the last 10 years, Lagos State’s spending on infrastructure development within the state has exceeded N3 trillion. The focus on infrastructure development is essential, fostering economic growth and boosting the state’s financial capacity, enabling it to attract further capital,” the offer documents stated.