Nigeria:
The Lagos State Government has unveiled a plan to issue bonds totalling N87.5 billion before the end of the 2013 fiscal year to take over the concession rights of the Lekki-Epe Expressway from the Lekki Concession Company (LCC).
The state government also spoke on plans to restructure its borrowing plan, noting that the N30 billion previously sought under the World Bank Development Policy Operation (DPO II) “will no longer materialise this year.”
The plan was contained in a letter dated August 19, which Governor Babatunde Fashola (SAN), addressed to the Speaker of the state House of Assembly, Hon. Adeyemi Ikuforiji, thereby seeking approval of the assembly.
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| Governor Babatunde Fashola |
In his letter, the governor pointed out the need for the state government “to issue bonds totalling N87.5 billion in this year, instead of the N35 billion originally envisaged” under the 2013 fiscal regime.
He, therefore, explained the rationales behind a change in the state fiscal plan, which he ascribed to the need “to cover the shortfall in the internally generated revenue (IGR) and the delay in disbursement of the World Bank DPO II.”
The governor added that the plan to issue the N87.5 billion bonds was basically to finance the acquisition of the concession rights (of the Lekki-Epe expressway) and take control of the toll regime for the benefit of our citizens.”
Fashola said the state government would continue “to maintain its fiscal strategy designed to promote sustainable economic growth through the adoption of more accurate revenue estimates; gradual diversification of the state economy into new areas and provision of enabling investment climate in the state.”
He expressed the state government’s willingness, “to maintain sustainable public borrowing and efficient public debt management. Even though the resultant deficit has risen to N79.865 billion, it is still consistent with our fiscal policy of declining deficit when compared with the 2012 actual deficit, which was N89.45 billion.”
At the assembly’s plenary yesterday, the state Commissioner for Economic Planning and Budget, Mr. Ben Akabueze, said the decision to acquire the concession was for the interest of the residents of the state.
The commissioner explained that part of the plan by government for the review of the agreement with the LCC was to pay them off in order to take full possession of the road.
Akabueze said the government had already committed about N10 billion “to the funding of the project which took off in 2004 billed to cost N50 billion,” addingthat: “The state government will determine how much to be paid by motorists as toll on the road instead of allowing the concessionaire to fix prices when and how it likes.”
Also last night, the state government explained its position on the plan to buy-back the concession rights, attributing it to the agitation by the concessionaire to jack up the toll.
It also said the concession agreement with the concessionaire was not terminated as reported by a section of the media.
The state Attorney-General and Commissioner for Justice, Mr. Adeola Ipaye and his finance counterpart, Mr. Ayodele Gbeleyi, explained the state's decision in a statement they jointly signed yesterday.
According to the statement, the state government had neither terminated nor cancelled the concession agreement it entered into with the LCC to reconstruct and expand the expressway.
The statement said the state government "is engaged in buying back the rights pertaining to the concession ahead of the 30-year period stipulated in the Design, Build, Operate and Transfer (DBOT) Concession Agreement. This is to be achieved by purchasing all the shares in the LCC."
The statement explained that the state government came "to this decision to buy back the rights in the light of several developments clearly not envisaged in the 2006 Concession Agreement (which became effective in 2008).
"The project, given its pioneering nature, had some underlying assumptions and market indicators under which the transaction was concluded which have since drastically changed in a manner that it can no longer be sustained in its current form. Such include the devaluation of the Naira and costs of construction
"The LCC, which is the special purpose vehicle representing the investors, formally brought it to the attention of the state government that given the rapid rise in interest rates on local loans, and other cost parameters, it is compelled to raise tolls currently being charged at Toll Plaza One from N120.00 to N144.00 per car.
"The concessionaire also brought it to the attention of the state government, that as provided for under the agreement, tolling would have to commence at Toll Plaza Two.
"In addition, the concessionaire indicated that unless it realised more income from increased rates at Toll Plaza One and commence tolling at the same rate per Car at Toll Plaza Two, it would not be able to meet its commitments to investors in the project and continue to fund completion of the remaining sections of the road.
"The LCC stated that Toll Plaza Three, as contained in the agreement, must be built and tolls collected for the continued viability of the project. Under such circumstances, the state government felt obliged to buy out the interests of the concessionaire in advance of the hand-over date of 2038 under a mutual settlement option also expressly provided for in the Concession Agreement," the statement said.
The statement added that the decision to acquire the concession was taken after due consultation with all major stakeholders including the State House of Assembly based on various feedback and agitation the state government received from the concessionaire
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