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Lagos State Commences Price Discovery on Proposed Seven-Year $507 Million Bond Sale

By on November 14, 2012

Governor of Lagos, Tunde Fashola

Lagos State, Nigeria’s biggest commercial city also regarded as sub-Saharan Africa’s biggest city, concerning its proposed seven-year 80 billion-naira ($507 million) bond sale has started a process to gauge investor interest.

The chief executive officer of Lagos-based Chapel Hill Denham Securities Ltd, Jude Chiemeka disclosed this on phone yesterday saying, Coupon guidance has been given at 12.75 percent to 14 percent with order requests closing on Nov. 19.

According to a term sheet obtained by Bloomberg News, The projected size of the issue may change once the book- building process has been completed.

During an interview on the 27th of October the Lagos State Governor Babatunde Fashola said, the proceeds from the sale would be used to fund infrastructure projects including an urban rail line to help ease traffic congestion in Lagos.

Based on data compiled by Bloomberg, when Lagos State sold 50 billion naira of five-year securities with a 13 percent coupon, it issued debt in 2008, seven-year bond sale in April 2010 at a 10 percent coupon.

In addition, data compiled by the Lagos-based Financial Markets Dealers Association reveal that after JPMorgan Chase & Co. announced in August that it will add the country’s bonds to its GBI-EM index series from Oct.1, the planned sale comes after borrowing costs for Nigeria’s federal government dropped. Since the yield on the 16.39 percent has dropped to 12.74 percent since the start of August.

Lagos is the most densely populated, with about 22 million people living in the metropolitan, irrespective of the fact that it has the smallest in land area of Nigeria’s 36 states. According to the state government just 2006 the figure stood at 17 million, which translates a fast growing population increasing at 3 per cent every year.

The regional government is working hard to invest on infrastructural projects to ease the city’s traffic congestion include the rail system, which requires more $1 billion in financing. The projects are moving at a slow pace following shortage in finance as reported by the State Governor.