… Lagosians set to service AFDB loan on the project till August 2034
Oredola Adeola
The Lagos State Government has received a legislative backing to acquire the assets and liability of Lekki Concession Company Limited, LCC, a development that will make the state to assume full ownership.
This was the decision made by the Lagos State House of Assembly during its plenary on Thursday.
Consequently, the state House of Assembly granted the Governor Babajide Sanwoolu his request for the conversion of the African Development Bank's (AFDB) loan to alleviate the debt obligations incurred by the State Government and be able to legally take full ownership of Lekki Concession Company Limited, LCC.
What is however not clear is the state Government's claim that it acquired ownership of the Lekki Concession Company (LCC) and the Lekki-Epe Expressway toll gate in December 2014.
In August 2013, the administration of ex-governor Babatunde Fashola had requested a supplementation of the fiscal budget to grant total control of the expressway to the state.
This, the government said, would prevent a wanton increase of the toll by the concessionaire, and leave the state with wider policy options.
The state House of Assembly subsequently approved N7.5bn to accelerate the acquisition process.
In March 2018, the Human and Environmental Development Agenda (HEDA) requested Akinwumi Ambode, Lagos State governor to give an update on the state’s acquisition of parts of the Lekki-Epe Expressway.
Olanrewaju Suraju, chairman, HEDA resource centre, said Lagosians deserve to know why there has been a delay in the acquisition, and also the contract terms and agreement entered into by the state government and the LCC.
According to Suraju, the state's tax payers deserve more than “passing toll increment and public-private-partnership shrouded in secrecy, opacity and conjectures”.
Responding to HEDA’s Freedom of Information (FOI) request for an update, the state's ministry of transportation said it acquired the road and the LCC in December 2014.
The permanent secretary of the ministry, in a letter dated May 8, 2018, said the state acquired the LCC and toll gate through a share and purchase agreement.
“The Lekki-Epe Concession (the project) was initiated by the ministry of transportation under the infrastructure development programme by the former administration.,” the letter read.
“Please, be informed that the Lagos state government via a share and purchase agreement acquired Lekki Concession Company limited in December 2014. The Lekki Concession Company Limited was set up as a special purpose vehicle to execute the Eti-Osa/Lekki-Epe expressway toll road concession.
“The project which was initially designed as a public private partnership project was based on assumptions and economic indicators that are no longer consistent with market realities. In the circumstance, and upon consultation with the erstwhile shareholders, and all major shareholders including the state House of Assembly, the project was restricted, hence the acquisition of same by the government.
“Further information can be obtained from the Lekki Concession Company if required.”
Between that period up until now nothing has been heard about that development, as LCC is assumed to be owned by the state Government.
Prior to this recent development, the state Government had on Monday 21st June, 2021 made official request to that effect seeking legislative backing for ownership of the asset.
The request was sent to Committee on Finance to further look into and report its findings to the House.
The Chairman of the Committee, Hon. Rotimi Olowo, while presenting the committee’s finding disclosed that upon the buy-out of all the shareholdings interest of the Lekki Concession Company Limited, LCC by the State, the Lagos State Government is now the subsitting shareholders of LCC with 75% shareholding while the Office of Public Private Partnerships,holds a shareholding of 25%.
He further stated in the report that the original $53.9 million loan obligation from a private sector facility, AFDB has been resolved after series of engagement between AFDB, LCC and the State Government to convert the loan to a public sector facility with the benefit of a considerable reduction in interest charges of 1.02% of $1.12million bi-annual as against the 4.12% of $2.746million per bi-annual thus giving a savings of $1.16million bi-annual or $3.24milliom per annum.
The Committee therefore listed in its recommendations based on the observations that the House therefore grant the executive the approval to convert the AFDB loan to the public sector loan backed up by sovereign Federal Government guarantee on behalf of the State Government.
It also asked the house to authorize the State Government to issue a counter guarantee in favour of the Federal Government along with an irrevocable standing payment order (ISPO) to deduct from Lagos State Government statutory allocations the amounts required to service the loan obligations until maturity in August 2034.
Debating on the report before the initial approval; Hon. Gbolahan Yishawu supported that the recommendation and request is a smart move as the interest rate will not injure what the State is spending on capital expenditure. He added that it reduces the interest risk as well as the rate by moving the loan from private sector to public sector.
The Speaker of the House, Rt. Hon. (Dr.) Mudashiru Obasa upon the receipt of the report directed the Acting Clerk of the House, Mr. Olalekan Onafeko, to send a clean copy of the resolution of the House to Mr. Governor, Mr. Babajide Sanwo-Olu for accent.
Hon. Abiodun Tobun, in his contribution said that saving 3.1% in interest rate difference will further reduce the burden on the State Government and encourage the savings to be used to develop other sector.
In addition, Hon. Femi Saheed viewed that the restructure of the loan shows transparency in the State financing and gives add-on flexibility for the additional years granted for the repayment of the loan.
He deemed the request a standard financial procedure practiced all over the world.
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