Nigeria’s Lagos Has Record Bond Approved for Biggest City

Plans to sell a record amount of bonds by Nigeria’s Lagos state, which holds sub-Saharan Africa’s biggest city, were approved by the country’s markets regulator.

The Nigerian Securities and Exchange Commission cleared the region’s government to sell 87.5 billion naira ($553 million) of bonds maturing in November 2020, the second and final tranche of a 167.5 billion-naira issuance program that started in November last year, Lagos-based Chapel Hill Denham, the lead book runner, said in an e-mailed statement today.

Lagos’ population probably rose 29 percent since 2006 to about 22 million people, according to the local government. It has the smallest inland area and is the most densely populated of Nigeria’s 36 states. The region’s administration, led by Governor Babatunde Fashola, is investing in infrastructure to meet the needs of a population it estimates is increasing 3 percent a year. About 70 percent of Lagosians live in slums, according to London-based Amnesty International.

The bond “will contribute to the completion of ongoing infrastructure projects to enhance the provision of social services aimed at improving the living standards of Lagosians,” Ayo Gbeleyi, the state’s commissioner for finance, said in the statement.

The proceeds will be used to fund projects including the Lagos-Badagry expressway, a metropolitan railway, mother-and-child care centers and to buy back the entire shareholding of the Lekki Concession Company, which was set up to build roads in the region, according to the statement.

Price Guidance

Book building for the notes will open next week with targeted investors including pension funds, banks, money managers and high-net-worth individuals, Chapel Hill Denham said in the statement.

“This is the largest bond that Lagos state has ever sold, but we still believe it will be oversubscribed,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank Group Ltd., said by e-mail today. Demand may be higher than the offer because “there is excess liquidity in the system and because of the state’s track record in the market and ability to generate significant internally generated revenue,” he said.

Price guidance for the issue is 13 percent to 13.75 percent, Gadio said. Lagos sold 80 billion naira of debt last year with an interest rate of 14.5 percent.

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