Lagos State Sets New Benchmark in Nigeria’s Subnational Finance
Lagos State has once again set a new benchmark in Nigeria’s subnational finance by raising a record N244.82bn through two oversubscribed bond issues, including the nation’s first-ever subnational green bond. This achievement highlights increasing investor confidence in the state’s fiscal discipline, forward-looking strategy, and ambitious infrastructure plans.
At the Investment Banking Awards Dinner of the Association of Issuing Houses of Nigeria, the Lagos State Commissioner of Finance, Abayomi Oluyomi, expressed his excitement over the historic offerings of the state government in the bond market, which were about 70 per cent oversubscribed. The oversubscription not only signals robust investor appetite but also indicates that the next offering from the Lagos State Government will be larger.
The subnational government concluded the issuance of two bonds totalling about N244.82bn, which includes the first-ever N14.82bn Series 3 Green Bond, as well as the N230bn Series 4 Conventional Bond under the Lagos State N1tn Debt and Hybrid Instruments Issuance Programme.
The Green Bond: A Milestone for Climate-Friendly Development
The green bond, the first to be issued by an African subnational entity, is an N14.82bn, 5-year, 16.00 per cent Fixed Rate Series 3 Green Bond due in 2030. The government said the offering reflected its commitment to climate-friendly development, infrastructure sustainability, and environmental resilience.
The Finance Commissioner, who spoke at the signing of the transaction, noted that a rigorous project selection process had been undertaken for the bond, “underscoring our dedication to financing initiatives that align with the United Nations Sustainable Development Goals and deliver measurable environmental impact. It is equally important to highlight that we obtained a credible second-party opinion on the bond and that it fully meets global green bond standards, having been certified by the internationally recognised Climate Bonds Initiative.”
The Conventional Bond: A Record-Breaking Achievement
The second bond is an N230bn, 10-year, 16.25 per cent Series 4 Conventional Bond due in 2035. This is the largest single bond issuance ever undertaken by Lagos State and the largest subnational bond issuance in the history of Nigeria.
This is not the first time the state has tapped the debt market for funds. According to the Securities and Exchange Commission, the state’s evolution as an issuer began with the foundational N30m revenue bond in 1987 to fund the Lekki Peninsula Scheme 1. Following the success of the first issuance, a second Lagos State Revenue Bond was issued in 1988, raising N60m, also carrying a 19 per cent coupon and maturing in 1999, continuing the development of the Lekki Peninsula.
After years of absence, the state returned to the market in 2002 with a N15bn bond to refinance development projects. Again in 2008, via the Lagos State Government Bond—Series 1 under the N275bn Debt Issuance Programme, it sought to raise N50bn at 13 per cent for the refinancing of outstanding loans and the financing of ongoing projects. The issue was 117.93 per cent oversubscribed. In 2010, the government issued Series 2 under the same programme, a N57.50bn bond at 10 per cent, maturing in 2017.
In 2012, the size of the bond issuance rose to N80bn at 14 per cent for the construction of Adiyan Waterworks (Phase II), infrastructure developments (roads, rail, buildings, and bridges, etc.), health facilities, and the redevelopment of Eric Moore Schools (Phase I). In 2013, it was N87.50bn at 13.5 per cent for infrastructure developments, health facilities, construction of the Adiyan Water Project (Phase II), and shoreline protection works.
Funding Critical Infrastructure and Social Projects
For the current issuances, the state government has said that the proceeds will be used to fund critical infrastructure and social projects, including the expansion of highways to ease mobility across the state; construction and rehabilitation of roads aimed at boosting productivity; development of affordable housing schemes to meet the needs of the growing population; upgrading of healthcare facilities, including the development of a new 280-bed hospital; installation of alternative solar power systems across schools; and the establishment of agro-processing hubs to strengthen food security.
Speaking at the bond signing ceremony, the Lagos State Governor, Babajide Sanwo-Olu, emphasized the significance of these achievements. He stated that when this administration assumed office, the first bond issued in 2020, about N100–N110bn, was, at that time, the highest in their history. Every bond that followed has broken previous records. Today, they break yet another one. Lagos State has now issued the first-ever subnational Green Bond in Nigeria, raising N14.82bn.
Investor Confidence and Strategic Vision
Chapel Hill Denham served as the lead issuer for the transaction. The Chief Executive Officer, Bolaji Balogun, highlighted that while many states in Nigeria face challenges in issuing bonds due to transparency and compliance issues, Lagos stands out as a beacon of best practices and innovation.
A representative of the Deputy High Commissioner and Nigeria Finance & Investment Mobilisation Lead at the British High Commission, UK Foreign, Commonwealth & Development Office, Temilola Akinrinade, noted that the issuance was the result of a long-term partnership between Lagos State and the United Kingdom Government, which included support in developing a green bond framework.
She added that the significant oversubscription of the bond issuance showed that Lagos State can effectively access capital markets, attract strong demand, and set a precedent for other regions, creating opportunities for climate-resilient growth.
Future Plans and Economic Reforms
Not done, the Lagos State Government has already announced plans to issue N1tn worth of asset-backed securities in the first quarter of next year as part of efforts to deepen the capital market and unlock value from state-owned assets.
Highlighting the state government’s favourable stance as an issuer, the Group Managing Director of Afrinvest, Ike Chioke, told journalists at the Investment Banking Awards: “Lagos State has benefited from what I call fiscal discipline, starting with being PENCOM-compliant. Lagos is one of the few states that is totally pension-compliant, meaning it remits workers’ contributions monthly to PFAs. As a result, any Lagos State instrument is eligible for PFA investment. With pension funds managing over N20tn, that is a large wall of capital seeking opportunities. More than 60 per cent, closer to 70 per cent, is tied up in FGN instruments, so the industry is looking for places to deploy capital. Lagos is among the few subnationals able to attract this capital directly.”
