. As Lagos State seeks N25bn for green investment
Amid public outcry about Nigeria’s rising debt already amounting to N33trillion and the capacity to repay, President Muhammadu Buhari, yesterday, sought lawmakers’ approval to borrow additional N2.2 trillion.
Specifically, the President is seeking the approval of the National Assembly to borrow another $4.054 billion, and €710 million loan from bilateral and multilateral organisations to fund the deficit in the 2021 budget.
The $4 billion new loan is about N2.2 trillion at the current $1 to N550 exchange rate.
This comes as Lagos State Governor, Babajide Sanwo-Olu, signed a Memorandum of Understanding (MoU) to finance its over $60 million (N25 billion) green programme.
Lagos thus became the first sub-national government to activate the framework for the unlocking of the $1 trillion Nigerian Green Bond Market Development Programme to finance key infrastructure projects.
Buhari also sought approval for the grant components of $125 million, as contained in a letter read out by Senate President Ahmad Lawan, at the start of plenary on Tuesday.
The projects listed in the external borrowing plan are to be financed through sovereign loans from the World Bank, French Development Agency, EXIM Bank and IFAD in the total sum of $4,054,476,863 and €710 million and grant components of $125 million.
In the letter to the Senate, the President explained that the loan request is an addendum to the 2018-2020 borrowing plan, adding that borrowing more funds is to meet “emerging needs” of some “critical projects.”
This new request comes barely two months after the lawmakers approved his earlier application to borrow $8.3 billion and €490 million loans, as contained in the initial 2018-2020 borrowing plan.
Approval for the last request was granted on the grounds that the funds would be deployed into projects geared towards the realisation of the Nigerian Economic Sustainability Plan (NESP) that cut across key sectors such as infrastructure, health, agriculture and food security, energy, COVID-19, and a host of others.
For the new loans, the letter reads in part: “I write on the above subject and submit the attached addendum to the proposed 2018-2020 external rolling borrowing plan for the consideration and concurrent approval of the Senate for the same to become effective.
“The distinguished Senate President may recall that u submitted a request on 2018-2020 borrowing plan for the approval of the senate in May 2021.
“However, in view of other emerging needs and to ensure that all critical projects approved by FEC as of June 2021 are incorporated, I hereby forward an addendum to the proposed borrowing plan.
“The projects listed in the external borrowing plan are to be financed through sovereign loans from the World Bank, French Development Agency, EXIM Bank and IFAD in the total sum of $4,054,476,863 and €710 million and grant components of $125 million.”
Clarifying further, the President said the loans, when obtained, will stimulate the economy and create job employment.
Lagos Green Bond
Towards financing its green programmes, Sanwo-Olu signed a Memorandum of Understanding (MoU) with FMDQ Group and Financial Sector Deepening (FSD) Africa, the implementing partners on the proposed N25 billion (over $60 million) financing.
The Governor said the MoU was the crucial first step being taken by Lagos towards creating viable financing options for future green and sustainability projects, and in particular, will advance the adoption of innovation and technologies to provide green jobs, thereby promoting economic and climate resiliency.
The historic event, held at the State House in Marina, came less than 24 hours after Lagos was upgraded to AAA (nga) rating from AA+ (nga) by Fitch International for the State’s good standing on debt sustainability and resilience.
Sanwo-Olu added that the green bond programme, being supported by the UK Agency for International Development (UK Aid), would raise the capacity of the State Government to deliver more key infrastructure and social projects that would keep Lagos on the path of prosperity.
Launched in 2018, the Green Bond Market Development Programme is to facilitate development of a green bond market to support broader debt capital markets reforms that will impact the sovereign and non-sovereign bond markets in Nigeria.
The programme is geared towards empowering state governments to champion sustainable finance for development.
Sanwo-Olu said: “As a Government, we are committed to utilise our limited resources more efficiently to create a circular economy, which is a promising and viable alternative. Public spending and investments may not be enough to deliver our key objectives; therefore, the need to tap into more private investments for the transition to a zero waste and circular economy, as well as achieving crucial items of the Sustainable Development Goals (SDGs).
“I strongly believe that the Green Bond programme will open the doors of deep sustainable funds for infrastructure and social development for Lagos. Being the biggest player in the sub-national capital market, Lagos’ experience can open new doors for a lot of others.
“As a State, we embrace the transparency and commitment that comes with a Green Finance framework. We believe it sends an important signal to investors in the market about who we are: a State that is fiscally responsible, prudent and disciplined.”
He said the initiative would go a long way in ensuring that key deliverables in his administration’s T.H.E.M.E.S agenda are actualised, promising that Lagos will continue to blaze the trail in leadership, financial accountability, innovation and sustainability.
I strongly believe that the Green Bond programme will open the doors of deep sustainable funds for infrastructure and social development for Lagos. Being the biggest player in the sub-national capital market, Lagos’ experience can open new doors for a lot of others.
Commissioner for Finance, Dr. Rabiu Olowo, noted that Lagos had 20 years’ experience in raising bonds, and assured implementing partners and capital market operators of the State’s commitment to the terms highlighted in the framework.
The Chief Executive Officer, FMDQ Group, Bola Onadele, said Lagos has built a reputation and “incredible potential” for catalysing broad-based sustainable development, which explained the partners’ readiness to support the state in unlocking the capital to fund key projects.
He said: “I have no doubt that the implementation of this MoU and the impact thereof will ensure that Lagos continues to set itself apart, support its developmental aspirations and highlight its sustainability efforts at the global green and sustainable finance ecosystem. We are excited about this opportunity to support the developmental aspirations of Lagos.”
Also, FSD Africa CEO, Mark Napier, commending the Governor’s infrastructure drive, said: “It’s truly a significant event that the economic powerhouse of Africa’s largest economy is signing the green bond investment and I can say this is leadership being demonstrated by the Lagos State Government. I expect other states to follow this path.”