THIS DOCUMENT IS IMPORTANT AND YOU ARE ADVISED TO CAREFULLY READ AND UNDERSTAND ITS CONTENTS. IF YOU ARE IN DOUBT ABOUT ITS CONTENTS OR THE ACTION TO TAKE PLEASE CONSULT YOUR STOCKBROKER, SOLICITOR, BANKER OR AN INDEPENDENT INVESTMENT ADVISER. THIS PROSPECTUS HAS BEEN SEEN AND APPROVED BY THE MEMBERS OF THE LAGOS STATE EXECUTIVE COUNCIL AND THEY JOINTLY AND INDIVIDUALLY ACCEPT FULL RESPONSIBILITY FOR THE ACCURACY OF ALL INFORMATION GIVEN AND CONFIRM THAT, AFTER HAVING MADE INQUIRIES WHICH ARE REASONABLE IN THE CIRCUMSTANCES AND TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THERE ARE NO OTHER FACTS, THE OMISSION OF WHICH WOULD MAKE ANY STATEMENT HEREIN MISLEADING.
For information concerning certain risk factors which should be considered by prospective investors, see risk factors on page 30.
THE LAGOS STATE GOVERNMENT OF NIGERIA
SUPPLEMENTARY SHELF PROSPECTUS OFFER FOR SUBSCRIPTION OF LAGOS STATE N57,500,000,000 FIXED RATE BOND [SERIES 2] 2010/2017 (UNDER THE N275,000,000,000 DEBT ISSUANCE PROGRAMME)
THIS SUPPLEMENTARY SHELF PROSPECTUS AND THE SECURITIES THAT IT OFFERS HAVE BEEN APPROVED AND REGISTERED BY THE SECURITIES & EXCHANGE COMMISSION. IT IS A CIVIL WRONG AND CRIMINAL OFFENCE UNDER THE INVESTMENTS AND SECURITIES ACT (NO. 29 OF 2007) TO ISSUE A PROSPECTUS WHICH CONTAINS FALSE OR MISLEADING INFORMATION. THE CLEARANCE AND REGISTRATION OF THIS PROSPECTUS AND THE SECURITIES WHICH IT OFFERS DOES NOT RELIEVE THE PARTIES FROM ANY LIABILITY ARISING UNDER THE ACT FOR FALSE AND MISLEADING STATEMENTS CONTAINED HEREIN OR FOR ANY OMISSION OF A MATERIAL FACT.
THE REGISTRATION OF THE SHELF PROSPECTUS AND ANY SUPPLEMENTARY SHELF PROSPECTUS DOES NOT IN ANY WAY WHATSOEVER SUGGEST THAT THE SECURITIES & EXCHANGE COMMISSION ENDORSES OR RECOMMENDS THE SECURITIES OR ASSUMES RESPONSIBILITY FOR THE CORRECTNESS OF ANY STATEMENT MADE OR OPINION OR REPORT EXPRESSED THEREIN.
THIS SUPPLEMENTARY SHELF PROSPECTUS IS A DRAFT RED HERRING PROSPECTUS AND IS ISSUED IN ACCORDANCE WITH SECURITIES & EXCHANGE COMMISSION GUIDELINES ON BOOK BUILDING. THE PROSPECTUS DOES NOT HAVE COMPLETE PARTICULARS OF THE COUPON TO BE PAID ON THE BONDS BEING OFFERED. UPON THE APPROVAL OF THE SECURITIES & EXCHANGE COMMISSION, AND BEFORE THE BID OPENING DATE, THIS DOCUMENT WILL BECOME A RED HERRING PROSPECTUS. THIS DOCUMENT WILL BECOME A PROSPECTUS UPON FILING WITH THE SECURITIES & EXCHANGE COMMISSION AFTER THE DETERMINATION OF THE COUPON. Lead Issuing House
RC 622258 Joint Issuing Houses
RC 261272
RC733583
RC 125097 RC446599 RC 639491 RC 446561 RC 672560
This Supplementary Shelf Prospectus will be available on the following websites on April 19, 2010:
www.lagosstate.gov.ng www.sec.gov.ng www.chapelhilldenham.com www.afrinvestwa.com www.radixng.com www.fbncapital.com www.firstcitygroup.com www.skyebankng.com www.stanbicibtcbank.com www.zenithcapitalmarkets.com
[ Book Build Opens April 7, 2010 Book Build Closes April 13, 2010 THE LAGOS STATE GOVERNMENT HAS NOT ISSUED AN IRREVOCABLE STANDING PAYMENT ORDER (“ISPO”) IN RESPECT OF THIS SERIES 2 ISSUANCE. CONSEQUENTLY, THE BONDS WILL NOT BE BACKED BY AN ISPO; NEITHER HAS A THIRD PARTY GUARANTEE BEEN OBTAINED
This Offer is restricted to Qualified Institutional Investors and High Networth Individuals as defined by the SEC Rules and Regulation 78(C)(2)
THIS SUPPLEMENTARY SHELF PROSPECTUS IS DATED APRIL 19, 2010
TABLE OF CONTENTS
1. SUMMARY OF THE OFFER ...... 4 2. PARTIES TO THE OFFER ...... 6 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL ...... 13 4. LAGOS STATE ...... 20 4.1. OVERVIEW OF LAGOS STATE ...... 20 4.2. JUDICIAL ADMINISTRATION ...... 21 4.3. LAGOS STATE TEN POINT AGENDA ...... 22 4.4. GOVERNANCE AND BEST PRACTICES ...... 25 4.5. MEDIUM TERM STRATEGY OF THE STATE ...... 25 4.6. FINANCES OF LAGOS STATE ...... 25 4.7. THE DEBT ISSUANCE PROGRAMME ...... 27 4.8. THE N50 BILLION FIXED RATE BOND ISSUANCE (SERIES 1) ...... 28 4.9 UPDATE ON USE OF PROCEEDS (SERIES 1) ...... 28 4.10 CONCLUSION ...... 29 5. RISK & MITIGATING FACTORS ...... 30 6. FINANCIAL FORECAST ...... 32 6.1. REPORTING ACCOUNTANTS’ REPORT...... 32 6.2. LETTER FROM THE JOINT FINANCIAL ADVISERS/ISSUING HOUSES ...... 33 6.3. REVENUE AND EXPENDITURE FORECAST ...... 34 6.4. ASSUMPTIONS ...... 35 7. FINANCIAL SUMMARY ...... 36 7.1. REPORTING ACCOUNTANTS’ REPORT...... 36 7.2. STATEMENT OF ASSETS AND LIABILITIES ...... 37 7.3. STATEMENT OF REVENUE AND EXPENDITURE ...... 37 7.4. NOTES TO THE FINANCIAL STATEMENTS ...... 37 8. RATINGS REPORT ...... 44 9. USE OF PROCEEDS ...... 46 10. BOOK BUILD PROCESS ...... 50 11. OTHER GENERAL INFORMATION ...... ERROR! BOOKMARK NOT DEFINED. 11.1 STATEMENT OF INDEBTEDNESS ...... 51 11.2 CLAIMS, LITIGATIONS AND DISPUTES ...... 51 11.3 MATERIAL CONTRACTS ...... 51 11.4 COSTS AND EXPENSES ...... 51 11.5 REMITTANCE TO SINKING FUND ...... 52 11.6 CONSENTS ...... 53 11.7 DOCUMENTS AVAILABLE FOR INSPECTION...... 56 11.8 RELATIONSHIPS BETWEEN THE STATE AND ADVISERS ...... 56 11.9 EXTRACT FROM TRUST DEED ...... 57 12. MATERIAL ADVERSE CHANGE STATEMENT ...... 58 12.1 DECLARATION ...... 58 13. PROCEDURE FOR APPLICATION AND ALLOCATION/ALLOTMENT ...... 59 13.1 APPLICATION ...... 60 13.2 PAYMENT INSTRUCTIONS...... 61 13.3 ALLOCATION/PAYMENT ...... 61 13.4 DETAILS OF BANK ACCOUNT ...... 61 14. APPLICATION FORM ...... 62
2
INDICATIVE TIMETABLE
Date Activity Responsibility
Circulate Red Herring Prospectus to Qualified Investors (Pre-Marketing) Issuing Houses
April 7, 2010 Book opens Book Runners
April 13, 2010 Book closes Book Runners
April 14, 2010 Determine Coupon Rate and Aggregate Amount of Book Runners/LASG Bonds to be Issued
April 14, 2010 Despatch Allotment Confirmation Letters Book Runners
April 14, 2010 File amended/updated prospectus with the SEC Issuing Houses
April 16, 2010 Effect Payment for Allotted Bonds Allottees/Participants
April 19, 2010 Hold Completion Meeting (Application Lists Opens Issuing Houses/LASG and Closes)
April 19, 2010 Allotment of bonds to Qualified Investors Issuing Houses
April 19, 2010 File Allotment Schedule with SEC Issuing Houses
April 21, 2010 Issue proceeds transferred to LASG Issuing Houses/Receiving Banks
Credit CSCS Accounts/Despatch Bond Certificates Registrars
April 21, 2010 File executed documents with the SEC Issuing Houses
April 21, 2010 Publish Allotment Announcement Issuing Houses
April 22, 2010 Listing of bonds on the Nigerian Stock Exchange Stockbrokers
April 2010 Trading of bond commences Stockbrokers/ Primary Dealers
3
1. SUMMARY OF THE OFFER
1. Issuer: The Lagos State Government of Nigeria (“Lagos State” or “the State”)
2. Series Number: 2
3. Principal Amount: N57,500,000,000.00 (Fifty-Seven Billion Five Hundred Million Naira Only)
4. Par Value N1,000.00 (One Thousand Naira)
5. Issue Price: At Par
6. Units of Sale Minimum subscription of N10,000,000 and multiples of N5,000,000 thereafter
7. Bond Issue Date: 2010^
8. Bond Maturity Date: 2017^
9. Coupon Basis: Fixed Rate
11. Coupon: 10% per annum
12. Redemption/Payment Basis: Redemption at Par
13. Listing: The Nigerian Stock Exchange
14. Method of Distribution: By way of Book Building. The Issue Price/Coupon is fixed after the Bid Closing Date/Issue.
15 Qualified Investors The investors that are permitted to participate in this Book Building are High Networth Individuals (that is, individuals with a minimum net worth of N300 million) and Qualified Institutionals which includes Fund Managers, Pension Fund Administrators, Insurance Companies, Unit Trusts, Multilateral and Bi- Lateral Institutions, Registered and/or Verifiable Hedge Funds, Market Makers, Staff Schemes, Trustees/Custodians and Stockbroking firms as stipulated by Rule 78(C)(2) of the Rules and Regulation of the Securities and Exchange Commission. Retail Investors are exempted from this offer.
16. Rating:^ The bonds have been assigned an A+ rating by Agusto & Co. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency.
17. Utilisation of Proceeds: Use of Proceeds Amount % Completion Period Finance ongoing infrastructural Projects 42,142,566,802.50 75.54% On-Going Refinance Outstanding Loans Immediate 13,645,845,697.50 24.46% TOTAL 55,788,412,500.00 100.00%
^ These dates are tentative and depend on the date on which the Issuer receives the proceeds of the Offer following the Securities & Exchange Commission’s approval of the Allotment Proposal. Consequently, the Issue Date will be the date on which issue proceeds are remitted to the Issuer and the Maturity Date will the date which is 84 (Eighty-Four) months following the Issue Date
After deduction of the cost of the offer estimated at 2.98% of gross issue proceeds. Details of Utilisation of Proceeds are set out on page 46 4
18. Provisions Applicable to Lagos State Series 2 Fixed Rate Bonds:
Fixed Coupon Rate 10% per annum, payable semi-annually in arrears Frequency of Coupon Payment Semi-Annual Commencing 6 (six) months from the date of issue; and every 6 (six) months thereafter (up to and including the Maturity Date); provided that the first Coupon Payment Date(s) coupon shall be pro-rated to coincide with the Coupon Payment date that is six-months from the date of issue of the Bonds. Fixed Coupon Amount N100 per N1,000 in principal amount of Bonds Fixed Day Count Fraction Actual number of days in a month/Actual number of days in a year
19. Security Trust Structure: Payments to the Sinking Fund will be made solely from the Consolidated Debt Service Account. The Lagos State Government has not issued an ISPO in respect of this Series 2 Issuance. Consequently, the Bonds will not be backed by an ISPO
20. Final Redemption Amount: N57,500,000,000.00 21. Status of the Bonds: Registered and Listed Bonds 22. Sinking Fund and A Sinking Fund will be created in accordance with the provisions of the Bond Law Consolidated Debt Service and the ISA. The Sinking Fund shall be funded from the Consolidated Debt Service Account Account (“CDSA”). The deduction in respect of the Sinking Fund will be a first charge with full commitment on the CDSA of the State. The CDSA is funded on a regular basis by 15% of the State’s monthly internally generated revenues. 23. Fee Consideration: Registration, transfer, coupon interest payments, principal repayment, issue of certificates of title and certifications of transfers of bonds will be made free of any fees, duty, charges, deductions or levy, except to the extent required by law
24. Tax Considerations: The Bonds are exempt from taxation in Nigeria. As such, all payments made to Bondholders shall be free and clear of Withholding, State and Federal Income and Capital Gains Taxes with no deductions whatsoever being made at source. 25. Lead Book Runner/ Financial Chapel Hill Advisory Partners Limited (“Chapel Hill”) Adviser / Issuing House:
26. Co-Book Runners/Joint Afrinvest (West Africa) Limited (“Afrinvest”), Radix Capital Partners Limited Financial Advisers / Issuing (“Radix”), FBN Capital Markets Limited (“FBN Capital”), FCMB Capital Markets Houses: Limited (“FCMB-CM”), Skye Financial Services Limited (“Skye”), Stanbic IBTC Bank Plc (“Stanbic IBTC”) and Zenith Capital Limited (“Zenith Capital”) 27. Stockbrokers to the Offer: Marina Securities Limited, Afrinvest (West Africa) Limited, Chapel Hill Denham Securities Limited, Camry Securities Limited, Clearview Securities Limited, CSL Stockbrokers Limited, Dominion Trust Limited, FBC Trust & Securities Limited, FBN Securities Limited, FIS Securities Limited, F& C Securities Limited, Greenwich Trust Limited, IBTC Asset Management Limited, Profund Securities Limited, PSL Limited, Pyramid Securities Limited, Reward Investment Limited, Security Swaps
Limited, Signet Investments & Securities Limited and Zenith Securities Limited
28. Receiving Banks: Access Bank Plc, Afribank Nigeria Plc, Bank PHB Plc, Ecobank Nigeria Plc, Fidelity Bank Plc, First Bank Plc, First City Monument Bank Plc, Guaranty Trust Bank Plc, Intercontinental Bank Plc, Oceanic Bank Plc, Stanbic IBTC Plc, Skye Bank Plc, Sterling Bank Plc, Union Bank Plc, United Bank for Africa Plc and Zenith Bank Plc
29. Bid/Issue Period: April 7, 2010 to April 13, 2010 30. Delivery: Investors’ respective CSCS accounts will be credited electronically upon allotment. Investors are required to provide their CSCS account number and their Clearing
House Number (“CHN”) on the application form 31. Bonds Settlement: Bond purchases will be settled by electronic funds transfer; CIBFTS, NEFT or RTGS
32. Secondary Trading: Trading will be restricted to High Networth Individuals and Qualified Institutionals 33. Currency of Payment: Nigerian Naira
5
2. PARTIES TO THE OFFER
Issuer The Lagos State Government Lagos State Secretariat, Alausa Ikeja Lagos
Representatives of the State Executive Council His Excellency, Mr. Babatunde Raji Fashola, SAN Governor and Chairman, State Executive Council
Princess (Mrs.) Sara Adebisi Sosan Deputy Governor
Princess Adenrele Adeniran-Ogunsanya Secretary to the State Government
Mr. Rotimi Oyekan Honourable Commissioner for Finance
Mr. Ben Akabueze Honourable Commissioner for Economic Planning & Budget
Barrister Olasupo Shasore, SAN Honourable Commissioner for Justice & Attorney General
Mr. Adeniyi Oyemade Honourable Commissioner for Commerce and Industry
Dr. Muiz Banire Honourable Commissioner for Environment
Mr. Jide Sanwo-olu Honourable Commissioner for Establishment and Training
Dr. Jide Idris Honourable Commissioner for Health
Mr. Tunde Balogun Honourable Commissioner for Home Affairs and Culture
Dr. Dele Onabokun Honourable Commissioner for Housing
Mr. Opeyemi Bamidele Honourable Commissioner for Information and Strategy
Mr. Rotimi Agunsoye Honourable Commissioner for Local Government and Chieftaincy Affairs
6 2. PARTIES TO THE OFFER
Representatives of the State Executive Council Mr. Bolaji Abosede Continued Honourable Commissioner for Physical and Urban Planning
Prince Olanrewaju Waidi Balogun Honourable Commissioner for Rural Development
Dr. Kadri Obafemi Hamzat Honourable Commissioner for Science and Technology
Dr. Tola Kasali Honourable Commissioner for Special Duties
Senator Tokunbo Afikuyomi Honourable Commissioner for Tourism and Intergovernmental Relations
Professor Bamidele Badejo Honourable Commissioner for Transportation
Prince Adesegun Oniru Honourable Commissioner for Water Infrastructure Development
Mrs. Joke Orelope-Adefulire Honourable Commissioner for Women Affairs and Poverty Alleviation
Prince Demola Adeniji-Adele Honourable Commissioner for Youth, Sports and Social Development
Chief Enock Kolapomoye Ajiboso Honourable Commissioner for Agriculture and Cooperatives
Auditor-General to the State Mr Olusola Olowo Arowa The Auditor General of Lagos State Lagos State Secretariat Alausa, Ikeja Lagos
Accountant-General to the State Mr Akin D. Ambode The Accountant General of Lagos State Lagos State Secretariat Alausa, Ikeja Lagos
7 2. PARTIES TO THE OFFER
Lead Financial Adviser / Issuing House Chapel Hill Advisory Partners Limited 1st Floor, 45 Saka Tinubu Street Victoria Island Lagos
Joint Financial Advisers / Issuing Houses Afrinvest (West Africa) Limited 12th Floor, Foreshore Towers 2A, Osborne Road Ikoyi Lagos
Radix Capital Partners Limited AIICO House, 3rd Floor PC 12 Afribank Street Victoria Island Lagos
FBN Capital Limited 16 Keffi Street South-West Ikoyi Lagos
FCMB Capital Markets Limited Primrose Tower 17A, Tinubu Street Lagos
Skye Financial Services Limited 3, Akin Adesola Street Victoria Island Lagos
Stanbic IBTC Bank PLC I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos
Zenith Capital Limited Zenith Heights, 4th Floor Plot 87, Ajose Adeogun Street Victoria Island Lagos
Lead Stockbroker Marina Securities Limited 3rd Floor 18 Adeyemo Alakija Street Victoria Island Lagos
8 2. PARTIES TO THE OFFER
Joint Stockbrokers Chapel Hill Denham Securities Limited 2nd Floor, 45 Saka Tinubu Street Victoria Island Lagos
Afrinvest (West Africa) Limited 12th Floor , Foreshore Towers 2A, Osborne Ikoyi Lagos
Camry Securities Limited Wesley House Annex 21/22 Marina Lagos
Clearview Investment Company Limited 6th floor NCR Building 6 Broad Street Lagos
CSL Stockbrokers Limited Primrose Towers 17A Tinubu Street Lagos
Dominion Trust Limited 207 Igbosere Road Lagos
FBC Trust & Securities Limited 3B Manuwa Street Keffi Lagos
FBN Securities Limited 16 Keffi Street SouthWest Ikoyi Lagos
F & C Securities Limited 13 Ribadu Road Ikoyi Lagos
FIS Securities Limited 2 Macarthy Street Onikan Lagos
Greenwich Trust Limited Plot 1689A Oyin Jolayemi Street Victoria Island Lagos
9 2. PARTIES TO THE OFFER
Profund Securities Limited PC1 Engineering Close Off Idowu Taylor Victoria Island Lagos
PSL Limited 3rd Floor Cathedral House 2 Odulami Street Lagos
Pyramid Securities Limited ICON House (8th Floor) Plot 999 Idejo Street Victoria Island Lagos
Reward Investments Limited New Africa House (10th Floor) 31 Marina Lagos
Security Swaps Limited Okoi Arikpo House 5 Idowu Taylor Victoria Island Lagos
Signet Investment & Securities Limited Signet Suite, Church House 29 Marina Lagos Island Lagos
Stanbic IBTC Asset Management Limited I. B. T. C. Place Walter Carrington Crescent Victoria Island Lagos
Zenith Securities Limited 4th Floor Zenith Heights 87 Ajose Adeogun Street Victoria Island Lagos
Joint Solicitors to the Offer Banwo & Ighodalo 98 Awolowo Road South- West Ikoyi Lagos
Simmons Cooper Partners 9th Floor, Fortune Towers 27/29, Adeyemo Alakija Street Victoria Island Lagos
10 2. PARTIES TO THE OFFER
Sofunde Osakwe Ogundipe & Belgore St. Nicholas House Catholic Mission Street Lagos
Receiving Banks Access Bank Plc Plot 1665 Oyin Jolayemi Street Victoria Island Lagos
Afribank Nigeria Plc Afribank Plaza 51/55 Broad Street Lagos
Bank PHB Plc Plot 707 Adeola Hopewell Street Victoria Island Lagos
Ecobank Nigeria Plc Plot 21 Ahmadu Bello Way Victoria Island Lagos
Fidelity Bank Plc 2 Kofo Abayomi Street Victoria Island Lagos
First Bank of Nigeria Plc Samuel Asabia House 35 Marina Lagos
First City Monument Bank Plc Primrose Tower 17A Tinubu Street Lagos
Guaranty Trust Bank Plc Plot 1669 Oyin Jolayemi Street Victoria Island Lagos
Intercontinental Bank Plc Intercontinental Plaza Plot 999c Danmole Street Victoria Island Lagos
Oceanic Bank International Plc 270 Ozumba Mbadiwe Avenue Victoria Island Lagos
11 2. PARTIES TO THE OFFER
Skye Bank Plc 3 Akin Adesola Street Victoria Island Lagos
Stanbic IBTC Bank Plc IBTC Place Walter Carrington Crescent Victoria Island Lagos
Sterling Bank Plc Sterling Towers 20 Marina Lagos
Union Bank Plc Stallion House 36 Marina Lagos
UBA Plc UBA House 57 Marina Lagos
Zenith Bank Plc Zenith Heights Plot 87 Ajose Adeogun Street Victoria Island Lagos
Joint Trustees to the State First Trustees Limited 2nd Floor, A.G. Leventis Building 42/43 Marina Lagos
Skye Trustees Limited 1st Floor, Skye Bank House Plot 5, Ikeja Commercial Scheme, Alausa Ikeja, Lagos
UBA Trustees Limited 2nd Floor, UBA House 57 Marina, Lagos
Union Trustees Limited 40 Marina Lagos Rating Agency Agusto & Co. 5th Floor, UBA House Marina Lagos Reporting Accountants KPMG Professional Services 22A, Gerard Road Ikoyi Lagos
Registrars to the State First Registrars Limited Plot 2, Abebe Village Road Iganmu Lagos
12
3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
The State has an Executive Council, which comprises the State Governor, the Deputy Governor, the Secretary to the State Government, the Commissioners, the Special Advisers, the Head of Service, Chief of Staff and the Deputy Chief of Staff. Special Assistants are also occasionally in attendance at the meetings of the Council. The profiles of some key representatives of the State Executive Council are provided below:
His Excellency, Mr. Babatunde Raji Fashola (SAN) is the Executive Governor of Lagos State. He holds a Bachelors degree in Law from the University of Benin (1987) and was admitted to the Nigerian Bar in 1988. He started his career with the law firm of Late Dr. G.I.S Omonuwa and afterwards worked for the law Firm of Sofunde, Osakwe, Ogundipe and Belgore as a litigator with specialization in areas such as intellectual property (registration of trade marks), commercial law (general contracts, mergers and acquisitions), land disputes, criminal law and chieftaincy matters. In 1993, he joined the law firm of K.O. Tinubu & Company, as an Investing Partner and became Managing Partner and Lead Counsel from 1994 to August 2002 when he was appointed as Chief of Staff to the former Governor of Lagos, Asiwaju Bola Ahmed Tinubu. Prior to his appointment as Chief of Staff, he had also served Lagos State as the Secretary of the Lands Sub-Committee of the Transitional Work Groups and on the State Government’s Panel of Enquiry into allocation of houses on the Mobolaji Johnson Housing Scheme at Lekki. He is a member of the Nigerian Bar Association, the International Bar Association, an Associate of the Chartered Institute of Taxation of Nigeria and a Notary Public of the Supreme Court of Nigeria and has been variously honoured with chieftaincy titles, awards and certificates of merit including the Distinguished Alumnus Award recently conferred on him by the University of Benin Alumni Association. He is a Patron of the Law Students Association of the University of Benin. On 29 May 2007, he was sworn in as the 13th Governor of Lagos State.
Mrs Sarah Adebisi Sosan is the Deputy Governor of Lagos State. She holds a Bachelors degree in English Education (1988), a Masters Degree in Adult Education (1989) from University of Lagos and an Advanced Diploma in Information Technology from Lagos City Computer College (2004). She began her professional career in 1989 and was appointed as a Master Grade II classroom teacher by the Lagos State Post Primary Teaching Service Commission. Between 1990 and 1999, she served as a Principal Education Officer at the State Ministry of Education and then moved to the defunct State Primary Education Board now Lagos State Universal Basic Education Board as an Assistant Board Secretary and was later redeployed as the Head of Department of the Communication and Information Technology Department. On 29 May 2007, she was sworn in as the Deputy Governor of Lagos State.
Princess Adenrele Adeniran-Ogunsanya is the Secretary to the Lagos State Government. She holds a Diploma in French from the University of Paris, Sorbonne, France and a Diploma in Law from the University of Lagos, Akoka. She began her working career in 1971 as the Personal Assistant to the Personnel and Employee Training Development Manager of Shell Company of Nigeria Limited, which later became National Oil and Chemical Marketing Company (NOLCHEM) and now Conoil Plc. She was a board member of the National Broadcasting Commission, patron of the Nigerian Red Cross, an honorary member of Lions Club International (District 404) and a member of the World Constitutional and Parliament Association. Princess Adeniran-Ogunsanya was the National Auditor of the unregistered Social Progressive Party and Constituency Chairperson of the defunct United Nigeria Congress Party (“UNCP”) in Eti-Osa. In 1998 she was elected to the House of Representatives on the platform of UNCP and was a foundation member of the Peoples Democratic Party in Lagos State. 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Mr. Rotimi Oyekan is the Honourable Commissioner for Finance of Lagos State. He holds a Bachelors degree in Economics from the University of Benin (1986). He received further professional training at the New York Institute of Finance, Wall Street, New York in 1991. At various times between 1987 and 2006 he worked as an Investment Manager with Capital Trust Brokers Limited, as the Chief Executive Officer of Griffiths Assets Management Limited and Head, Investment Banking at Stanbic Bank (Nigeria) Limited, a subsidiary of Standard Bank of South Africa. Until his present appointment, he was Managing Director, LAGBUS Asset Management Limited. He was also a member of the financial advisory team of Standard Bank of South Africa on the Lagos Infrastructure project/Fourth Mainland Bridge among several other transactional experiences.
Mr. Ben Akabueze is the Honourable Commissioner for Economic Planning and Budget for Lagos State. He is a distinguished banker, accountant, economist and administrator. He holds a first class Bachelors degree in Accounting from the University of Lagos (1982). He is a fellow of the Institute of Chartered Accountants of Nigeria and a member of the Nigeria Economic Summit Group. He has over 19 years experience in banking, rising to the apex of the profession as Managing Director/Chief Executive of NAL Bank Plc (2000-2005) and Executive Director, Sterling Bank Plc from January to August 2006. He has been serving as the Commissioner for Economic Planning and Budget of Lagos State since January 2007.
Barrister Olasupo Shasore (SAN) is the Attorney General and Commissioner for Justice of Lagos State. He is a versatile and dynamic legal practitioner. He holds a Bachelors degree in Law from Obafemi Awolowo University, Ile-Ife (1986) and a Masters degree in Law from the University of Lagos (1990). He has been in active practice for over two decades and was conferred with the Senior Advocate of Nigeria (SAN) in 2006.
Dr Obafemi Hamzat is the Honourable Commissioner for Science and Technology. He holds a Bachelors degree in Agriculture from the University of Ibadan, a Masters degree in Process Engineering from the same university and a Doctorate degree in Systems Process Engineering from Cranfield University, Bradford, England. He worked as a Senior Associate, PC Engineering at Morgan Stanley Inc. a leading glob,al investment bank and as Vice President, Investment and Core Technology Support Group at Merrill Lynch Inc., New York, USA. He also worked with Citibank, RTP Consulting Service, College of New Rochelle, New York and Columbia University also in New York. Prior to public service, he served as the Group Head, IT Strategy at Oando Plc, where he successfully managed the information assets for the entire group. He joined the Lagos State Government as Honourable Commissioner for Science and Technology in 2005.
Prince Ademola Adeniji-Adele is the Honourable Commissioner for Youth, Sports and Social Development. He holds a Bachelors degree in Chemical Engineering from the University of Ife (now Obafemi Awolowo University) (1977). He started his career as a Swimming Pool Engineer at the National Sports Commission in 1977 before joining Nichemtex Industries Limited, Ikorodu, as a Process Control Engineer between 1978 and 1983. He served as Chairman of Lagos Island Local Government from January 1990 to June 1993 and recorded landmark achievements in Education, Health, Sports, Youth Development and Employment Generation. Prior to his appointment as Honourable Commissioner for Youth, Sports and Social Development in June 2007, he was Chairman/CEO of Mirama Group made up of Regal Engineering Limited and Xcelsoft Technologies Limited.
14 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Dr. Tajudeen Odutola Kasali, the Honourable Commissioner for Special Duties, is a medical practitioner and immediate past Executive Chairman of Ibeju-Lekki Local Government Area of Lagos State. He attended the State Medical Institute, Zaporozhye, in the Ukraine and qualified as a Medical Doctor in 1980. He worked as a House Officer at the Lagos University Teaching Hospital (LUTH), Idi-Araba, Lagos, from 1980 to 1981 and as a youth corper at the Nigerian Navy Hospital, Point Road, Apapa, Lagos, between 1981 and 1982. Dr. Kasali was a General Physician at the Penta Clinic, Igbosere, between 1982 and 1985. He went into private medical practice and established Fatimoh Memorial Hospital and Maternity Home Limited in September 1985, which he ran as proprietor and Medical Director till November 1998. Dr. Kasali was elected Executive Chairman of Ibeju-Lekki Local Government Council in 1999, an office he held until May 2002. He became Honourable Commissioner for Rural Development and Infrastructure in 2003, and Honourable Commissioner for Health in 2006. He joined the present administration as Honourable Commissioner for Special Duties in 2007.
Mrs. Joke Orelope-Adefulire is the Honourable Commissioner for Women Affairs and Poverty Alleviation. She holds a Diploma in Computer Studies. Mrs Joke Orelope- Adefulire worked as a Secretary with Francis Nigeria Limited, Ikeja, Lagos, between 1980 and 1985, and with Paterson and Zochonis Industries, Nigeria Limited, Ilupeju, Lagos, between 1985 and 1991. She was elected to the Lagos State House of Assembly in 1991 during the Third Republic. Before the termination of the democratic process by the military in 1993, she served as Chairman of the State Legislatures’ House Services Committee. Mrs Adefulire founded Adejoke Nigeria Enterprises and Cladef Interests Nigeria Limited, Ikeja, Lagos, which she ran as Chief Executive until 2002 when she was appointed Electoral Commissioner by the Lagos State Independent Electoral Commission. She served in this capacity until she became the Honourable Commissioner for Women Affairs and Poverty Alleviation in June 2007
Mr. Babatunde Alade Balogun is the Honourable Commissioner for Home Affairs and Culture. He obtained a Bachelors degree in Social Science from Ahmadu Bello University (ABU), Zaria in 1976. Mr Balogun began his career in 1977 when he worked as a Management Trainee at United Trading Company (UTC) Nigeria Plc after which he served as a Computer Analyst-in-Training at the company’s Technical Division between 1978 and 1980. At the time of his voluntary retirement in 1981, he was the company’s Computer Systems co-ordinator. In 1982, Mr. Balogun set up Bailey-Babs Nigeria Limited, a computer software and bank equipment supply and maintenance company. An active politician for several years, he was a member of the defunct Unity Party of Nigeria (UPN) and subsequently the Social Democratic Party (SDP), Alliance for Democracy (AD) and Action Congress (AC). He was a member of the Lagos State Executive Council between 2002 and 2007, first as Commissioner for Commerce and Industry and later as Commissioner for Home Affairs and Culture. He was reappointed Commissioner for Home Affairs and Culture in June 2007.
15 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Mr Olanrewaju Waidi Balogun is the Honourable Commissioner for Rural Development. He holds a Bachelors degree in Economics from the University of Maiduguri, Borno State. Mr. Balogun began his career as a stock ledger clerk with John Holt Limited, Broad Street, Lagos, in June 1975, from where he moved to the Federal Ministry of Trade, Lagos as Price Control Officer during the National Youth Service Corps programme in June 1980. In July 1981, he became the Assistant Secretary to the Lagos State New Towns Development Authority (NTDA), a position he held until January 1984 when he became an Inspector of Taxes under the Lagos State Ministry of Finance. At various times, Mr Balogun also worked at the Nigerian Population Commission, Financial Institutions Training Centre, Yaba, and as Managing Director and Chief Executive Officer of Options Investments Limited, Lagos. In June 2002, he was appointed Supervisor for Agriculture, Rural and Social Development at Somolu Local Government Authority. He became the Honourable Commissioner for Rural Development in June 2007
Mr Enock Kolapomoye Olorunfunwa Ajiboso is the Honourable Commissioner for Agriculture and Co-operatives. He obtained a B.Sc. (Hons.), First Class in Agriculture Economics in 1977 from the University of Ibadan and a Masters in Business Administration (MBA) from the University of Lagos in 1980. He joined First Bank Plc as a Management Trainee in 1990, and was promoted to Senior Assistant Manager, Staff Training Development, in 1992. He later rose to become Deputy Manager, Manpower Planning in 1997. Mr. Ajiboso served as the elected Executive Chairman of Agege Local Government Council between 1992 and 1998 and was re-elected for another four-year term between 1999 and 2002. He also served as an ex-officio member of the Lagos State Executive Council in 2003, and as member of various election committees within the Alliance for Democracy and Action Congress for the 2003 and 2007 general elections. He was appointed Honourable Commissioner for Agriculture and Co-operatives in June 2007.
Dr. Olajide Idris, Honourable Commissioner for Health, Lagos State was born in Lagos on February 9, 1955. He holds an MB.BS degree from the College of Medicine, University of Lagos (1980) and a Master’s Degree in Public health (MPH) from Yale University, New Haven, Connecticut, USA (1985). Following postgraduate study Dr. Idris worked between April 1985 and 1988 in a senior management position with Health Aids Limited. He also served as Managing Partner of a private healthcare consulting firm between March 1992 and 1995. His stint in private healthcare covered areas such as healthcare planning, consulting and advisory, hospital management, clinical practice and research. In 1995, Dr. Idris returned to the United States of America to continue his medical practice and clinical clerkship with First Care Medical Clinic, Charlotte, North Carolina, Metrolina Nephrology Associates, P.A. and Mid Carolina Cardiology. In 1998, Dr. Idris became a Post-Doctoral Research Fellow in the Blood Pressure Research Unit at the Irvin Center for Clinical Research, Columbia University, New York. In recognition of his experience in areas of clinical practice, health planning, hospital management and health consulting/research, Dr. Idris was appointed the Permanent Secretary, in the Lagos State Ministry of Health, in June 1999 a position he held until July 2007 when he became the Honourable Commissioner for Health, Lagos State.
16 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Mr Opeyemi Bamidele is the Honourable Commissioner for Information and Strategy. He graduated from the University of Ife (now Obafemi Awolowo University), Ile-Ife in 1990 with a Bachelor of Arts degree in Law and was called to the Nigerian Bar in 1992. He earned a Masters of Law (LL.M) degree from the Franklin Pierce Law Centre in the United States of America in 1996. Mr Bamidele became actively involved in public service in 1992 when he served as Special Assistant (Legal) to the Chairman, Senate Committee on Finance, Appropriation and Banking, a position he held until November 1993. Prior to this, Mr Bamidele was the Principal Partner in the law firm of Opeyemi Bamidele and Associates with offices in Nigeria and the United States of America. He served as an Attorney at the Refugee Law Centre, Boston, Massachusetts, USA, from July 1999 to April 2000. He also served as Pro Bono Consulting Attorney and Human Rights Expert on Nigeria at Harvard University between September 1997 and April 2000. He was appointed Special Assistant to the Governor of Lagos State on Political and Inter- Governmental Relations in July 2000, a position he held until February 2003 when he joined the Lagos State Cabinet as Special Adviser to the Deputy Governor on Political Matters. Between November 2000 and June 2003, he was the National Director of Publicity for the Alliance for Democracy. In June 2003, he was appointed the Honourable Commissioner for Youth, Sports and Social Development and in July 2007, the Honourable Commissioner for Information and Strategy.
Mr. Bolaji Abosede, the Honourable Commissioner for Physical Planning and Urban Development, is an accomplished Town Planner. He graduated from The Polytechnic, Ibadan (1973) and the University of Strathclyde, Glasgow, Scotland (1977) and commenced his planning career at the local government level. He joined the Federal Housing Authority in 1981 as a Town Planning Officer. He rose to the position of Assistant General Manager and retired in 2004. Mr Abosede is a Fellow of the Nigerian Institute of Town Planners and was Lagos State Commissioner for Physical Planning and Urban Development from April 2006 to May 2007. He was reappointed to the same portfolio in June 2007.
Professor Bamidele Badejo is the Honourable Commissioner for Transportation. He is a Professor of Geography with specialization in Urban and Regional Planning, Transport Planning, Policy Operations and Management as well as Environmental Management and Impact Analysis. He has 184 academic publications to his credit and has taught at various institutions including the Lagos State University School of Environment and Biological Sciences, Thames Polytechnic, Deptford, London and Ogun State University, Ago-Iwoye. He is also a recipient of several academic awards of distinction. He was General Manager, Research, Planning and Environment at the National Inland Waterways Authority, Lokoja from May 2005 to May 2006. He was appointed Commissioner for Transportation in June 2007.
Prince Adesegun Abiodun Oniru is the Honourable Commissioner for Waterfront Infrastructure Development. He holds a Bachelors Degree in Civil Engineering from the University of Westminster and has over 18 years experience in project management, design and construction, investigation, renovation and maintenance. He also holds a certificate of competency in computing and software development. In 2003, he was appointed Managing Director of the Lagos State Waterfront and Tourism Development Corporation and in 2005, the Special Adviser on Works and Infrastructure. Prince Oniru was appointed Honourable Commissioner for Housing in the administration of former Governor of Lagos State, Asiwaju Bola Ahmed Tinubu. He was appointed Commissioner for Waterfront Infrastructure Development in June 2007.
17 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Dr. Muiz Adeyemi Banire is the Honourable Commissioner for Environment. He attended the University of Ilorin between 1984 and 1986, transferred to the University of Lagos in 1986 and obtained a Bachelor of Laws (LL.B) from that institution in 1988. He was called to the Nigerian Bar in 1989 and obtained a Masters of Law degree from the University of Lagos in 1991. Dr. Banire began his career in 1989 in the law firm of Gani Fawehinmi & Co. He subsequently worked with the law firm of Seun Akinbiyi & Co. in Lagos after his Youth Service. In 1999, he became a principal partner in the law firm of Akinbiyi, Banire & Co. in 1999. He served as Commissioner for Special Duties in Lagos State in 1999 and was transferred to the Transport Ministry as Commissioner in August 2000. He was appointed Commissioner for Environment in July 2007.
Mr. Babajide Sanwo-Olu is the Commissioner for Establishments & Training. He holds a Bachelors degree in Surveying from the University of Lagos and an MBA from the same institution. Prior to joining the public service, he had a successful career in Banking and Finance spanning 1993 to 2003. He was an Associate in the Corporate Finance Department of Kenneth Michael & Company Nigeria Limited (January to December 1993), a Senior Banking Officer with Lead Merchant Bank Plc (January 1994 to December 1995) and an Assistant Manager and Treasurer of the same institution between January 1996 and May 1997. He was also at various times a Senior Manager and an Assistant General Manager with United Bank for Africa Plc (1997 to 1999) and also Deputy General Manager with First Atlantic Bank Plc (now FinBank Plc) between July 2000 and February 2003. Between May 2003 and May 2007 he was Special Adviser on Corporate Matters to the Governor of Lagos State, Acting Commissioner for Economic Planning & Budget and Commissioner for Commerce & Industry. He was appointed Commissioner for Establishments and Training in July 2007.
Mr. Bamidele Onabokun is the Honourable Commissioner for Housing. He is a versatile Quantity Surveyor with over two decades of experience. He holds a B.Sc. in Building Economics from the South Bank Polytechnic (now South Bank University), United Kingdom. He served as Executive Chairman of the Special Committee for the Rehabilitation of Public Schools in Lagos State between 2004 and 2007, during which he supervised the rehabilitation and repair of thousands of dilapidated structures as well as the construction of over 2,000 new classroom blocks for Lagos State public schools. He was appointed Commissioner for Housing in July 2007.
Prince Rotimi Agunsoye is the Honourable Commissioner for Local Government and Chieftaincy Affairs. He holds a Bachelors degree in Computer Science from the University of Ibadan, and worked in the private sector from 1991 to 2002 before venturing into politics. He served as Deputy Executive Secretary/Supervisor for Education, Ikorodu Local Government between 2002 and 2003 and was appointed Special Adviser to the Lagos State Government on Physical Planning and Urban Development in April 2006. In this capacity, he was pivotal to the re-development of the Lagos Island Central Business District. He was appointed Commissioner for Local Government and Chieftaincy Affairs in June 2007.
18 3. REPRESENTATIVES OF THE LAGOS STATE EXECUTIVE COUNCIL
Senator Tokunbo Afikuyomi is the Honourable Commissioner for Tourism and Intergovernmental Relations. He is a graduate of Sociology from the University of Lagos and has been in active politics for the last two decades. He served as Special Assistant to the National Chairman of the now defunct Social Democratic Party (SDP) in the Third Republic and served as a Member of the Federal House of Representatives (1991 to 1993). He was a Senator of the Federal Republic of Nigeria from 1999 to 2007. Senator Afikuyomi was appointed Commissioner for Tourism and Intergovernmental Relations in June 2007.
Hon Adeniyi Oyemade is the Honourable Commissioner for Commerce and Industry. A political science graduate of Georgia State University, Atlanta, Georgia, USA he was a successful businessman prior to being elected to the Lagos State House of Assembly in 1997. Hon Oyemade served in the House from 1999 to 2007 and was variously Chairman, Education Committee, Chairman, Budget & Appropriation Committee as well as Member of several committees including Public Accounts, Sports & Social Development, Finance, Home Affairs & Culture and Mineral Resources committees. He was appointed Commissioner for Commerce and Industry in June 2007.
19
4. LAGOS STATE
4.1. OVERVIEW OF LAGOS STATE*
History Lagos State was created by virtue of the State (Creation and Transitional Provisions) Decree No. 14 of 1967 on May 27, 1967. The Decree No. 14 of 1967 restructured Nigeria’s Federation into 12 States. Prior to this, Lagos Municipality had been administered by the Federal Government through the Federal Ministry of Lagos Affairs as the regional authority, while the Lagos City Council governed the City of Lagos. The metropolitan areas (previously Colony Provinces) of Ikeja, Agege, Mushin, Ikorodu, Epe and Badagry were administered by the then Western Region.
The State became an administrative entity on April 11, 1968 with Lagos Island serving the dual role of State and Federal Capital. However, in 1976, Lagos Island ceased to be the capital of the State; the capital having been moved to Ikeja. The seat of the Federal Government was subsequently relocated to Abuja on December 12, 1991 and Lagos also ceased to be Nigeria’s political capital. Lagos nevertheless remains the nation’s economic and commercial capital.
Location The State is located in the South-Western part of Nigeria along the narrow coastal plain of the Bight of Benin. It lies between Longitude 20° 42’E and 3° 22’E and between Latitude 6° 22’ N and 6° 42’ N. It is bound in the North and East by Ogun State (Nigeria), in the West by the Republic of Benin and stretches over 180 km along the Guinea Coast of the Bight of Benin on the Atlantic Ocean. The State comprises of five administrative divisions namely Lagos (Eko), Ikeja, Ikorodu, Epe and Badagry and 20 Local Government Areas. Lagos State is geographically the smallest state in Nigeria, with an area of 358,861 hectares or 3,577 square kilometres.
Population According to the results of the 2006 census conducted by the National Population Commission (“NPC”), the State has a population of over 9 million, out of a national estimate of 150 million. The United Nations estimates that at its present growth rate, Lagos State will be the third largest mega city in the world by 2015 after Tokyo (Japan) and Mumbai (India). The rate of population growth is about 600,000 per annum with a population density of approximately 4,193 persons per sq. km. In the urban areas of the Lagos metropolis, the average density is over 20,000 persons per sq. km. Current demographic trend analysis reveal that the State’s population growth rate of 8% has resulted in its harbouring 36.8% of Nigeria’s urban population (World Bank, 1996) estimated at 49.8 million, of the nation’s 150 million population. The implication is that whereas Nigeria’s population growth is approximately 4 - 5% and globally 2%, the State’s population is growing ten times faster than New York and Los Angeles with grave implications for urban sustainability.
The Structure of Government Executive The affairs of the State are overseen by the Governor who is its chief executive. The Governor is elected to a four- year term of office renewable only for another four-year term. The Governor is vested with executive powers which, subject to the provisions of the Constitution and of any law made by the House of Assembly, may be exercised directly or through the Deputy Governor and Commissioners or Advisers. The Governor is empowered to appoint Commissioners and Advisers and to assign responsibilities to them, including the administration of any department of Government. An appointment to the office of Commissioner is deemed to have been made where no return has been received from the House of Assembly within twenty-one working days of the House’s receipt of the nomination of such a Commissioner from the Governor.
* Except as otherwise indicated, all numerical data in this section has been extracted without material adjustment from Lagos State’s 2009 budget presented to the Lagos State House of Assembly on November 10, 2008 (“the 2009 Budget” or “The Accelerated Growth Budget”), the Lagos State’s Accounts for the year ended December 31, 2008 and the unaudited 2009 Half-year Financial and Economic Review released in July 2009.
20 4. LAGOS STATE
Legislature The legislative powers of a state are vested in a unicameral legislative body called the House of Assembly. The current House of Assembly - constituted after the elections on April 21, 2007 - has 40 members. A state House of Assembly is required by the Constitution to consist of not less than twenty-four and not more than forty members who serve four-year terms. The Head of the House of Assembly is called the Speaker, assisted by a Deputy Speaker, both of whom are elected by the members of the House from amongst themselves. The House is made up of representatives from all the local governments within the state and subject to the provisions of the Constitution, exercises identical functions at the state level with those of the National Assembly at the federal level.
Judiciary The Chief Law Officer of the State is the Attorney General and Commissioner for Justice of the State. In accordance with the Constitution, judicial authority is vested mainly in the following courts: the State High Court, Sharia Court of Appeal of the State and Customary Court of Appeal of the State and such other courts as may be authorised by law to exercise jurisdiction at first instance or on appeal on matters with respect to which a House of Assembly may make laws. Presently, the state judiciary is made up of the State High Courts, the Magistrate Courts and the Customary Courts.
Local Government There are presently 20 (twenty) local government councils in Lagos State. Each local government area is administered under a local government council. The functions of local governments include the consideration and making of recommendations to the State on economic development, administrative and urban planning matters. Specific matters include collection of rates, radio and television licenses, establishment and maintenance of cemeteries and homes for the destitute or infirm, naming of roads and streets, numbering of houses and such other functions as may be conferred on a local government council from time to time by the State House of Assembly.
4.2. JUDICIAL ADMINISTRATION
The Lagos State Judiciary is the oldest Judiciary in Nigeria, having been in existence since the period of the Cession of Lagos to the British Government when it was known as the Colony Province Judiciary. The Magistrates’ Court was the first Court to be established. Thereafter, the High Court which was called the Supreme Court although its jurisdiction was limited to Lagos. On attainment of self-government, the Federal Territory of Lagos inherited the two systems of Courts, the Magistrates' Courts and the Supreme Court.
Following the creation of the Federal Supreme Court, the Lagos Supreme Court became the High Court of the Federal Territory, Lagos. Upon the creation of Lagos State, the High Court and the Magistrate Court of the Federal Territory were merged with the High Court and Magistrate Court of the former Western Region then at Ikeja. This became the Lagos State Judiciary.
There are four (4) Judicial Divisions in Lagos State - namely Ikeja, Lagos, Epe and Ikorodu Judicial Divisions - and seven (7) Magisterial Districts. The Magisterial Districts are Ikeja, Lagos Island, Yaba, Apapa, Ikorodu, Badagry and Epe. The Ikeja Judicial Division serves as the headquarters of the Lagos State Judiciary.
21 4. LAGOS STATE
4.3. LAGOS STATE TEN POINT AGENDA
The Lagos State Government’s vision of rebuilding Lagos through the execution of the Ten Point Agenda is being aggressively pursued. The areas in which significant and visible changes have occurred include the following:
1. Roads
. Road Construction and Improvement (Rehabilitation) is earnestly being undertaken by the Lagos State Government as part of infrastructure renewal. The attendant benefits of these road works include the urban renewal at local levels and the easing of traffic gridlock across the State. The projects are being executed state-wide, simultaneously at several Local Governments.
The information below illustrates the status (as at the date of this Prospectus) of a number of the Projects detailed in the Shelf Prospectus, and indicates Completed Projects (Table 1) and Significantly Advanced Projects (Table 2) undertaken since February 2008:-
Table 1 Completed Projects
Contract Sum Estimated Time S/N Project Title (N) Date of Award to Completion Remarks 1 Construction of Ajoke Sodamola Street, Fagba, Iju 102,158,472.90 Feb. 1, 2008 4 months Completed 2 Construction of Oremeji/Irepodun Str. Oko Oba 153,540,214.00 Feb. 1, 2008 4 months Completed 3 Construction of Adebayo Solanke Str. Ikeja 65,894,249.40 Feb. 1, 2008 4 months Completed 4 Construction of Ropo Owolabi. Str. Ikeja. 602,684,712.00 Feb. 1, 2008 4 months Completed 5 Construction of Beckley Estate. Ifako Ijaiye 148,974,987.50 Feb. 1, 2008 4 months Completed 6 Construction of Zawiyat Crescent, Ifako 98,553,759.50 Feb. 1, 2008 4 months Completed 7 Construction of Ogunnoike, Oworonshoki. Kosofe. 65,280,864.00 March 26, 2008 4 months Completed 8 Construction of Sule Abore Str. Ojodu. Ikeja (Phase 1) 41,587,029.00 March 26, 2008 4 months Completed 9 Construction of Lowa Str. Ikorodu 62,423,210.30 March 26, 2008 4 months Completed 10 Construction of Balogun Street Phase 1 77,072,050.00 Feb. 1, 2008 4 months Completed Rehabilitation of Ago Palace Way, Amuwo Odofin Bridge Phase 11 II 545,737,500.00 Feb. 1, 2008 4 months Completed Rehabilitation of Afric Road in Lagos Mainland Local 12 Government Area 39,413,636.13 May 14, 2008 12 weeks Completed Construction of Afolabi Aina and Adegbeyemi Street (Phase 1), 13 by Alade Market, Ikeja 63,274,429.50 June 14, 2008 12 weeks Completed 14 Rehabilitation of Modupe Ayo-Ade Street, Alimosho 88,529,542.76 March 26, 2008 4 months Completed Rehabilitation of Abayomi Owulade/ Olayeni/ Adetoro Street in 15 Magodo, Kosofe L.G.A 195, 609,786.47 April 30, 2008 8 weeks Completed 16 Itire-Lawanson Road, Surulere (Review of Contract) 117,047,995.55 May 14, 2008 14 weeks Completed 17 Construction of Alleyway, Victoria Island, Lagos 25,290,892.00 Feb. 1, 2008 4 months Completed
Table 2 Significantly Advanced Projects
Contract Sum Estimated Time S/N Project Title (N) Date of Award to Completion Remarks Infrastructural Improvement of Yaba (Jibowu) to Iddo- Mainland 1 LGA Phase I 4,074,720,046.78 Sept. 6, 2007 Nov. 2009 On-going Infrastructural Improvement of Yaba (Jibowu) to Iddo- Mainland 2 LGA Phase II 4,990,842,658.80 Feb. 2, 2008 Nov. 2009 On-going Upgrading/ Rehabilitation of Apapa Central Business District 3 (CBD), Apapa LGA Phase I 780,527,128.61 March 12, 2007 3 months On-going Upgrading/ Rehabilitation of Apapa Central Business District 4 (CBD), Apapa LGA Phase II 4,871,732,497.27 Feb. 1, 2008 July 2009 On-going
22 4. LAGOS STATE
Photos: Improved Road Network in Lagos State
The State Government has also commissioned one of its landmark projects, the construction of the Lagos - Badagry Expressway; which is to be built into a super highway comprising a 10 (ten) lane dual carriageway (five lanes on either side), a BRT corridor and light rail facilities.
2. Transportation
. The State’s commitment to an Integrated Mass Transit Programme – comprising road, rail and water transportation services is borne out by: - The Bus Rapid Transit system (“BRT”) with approximately 500 buses transporting 210,000 passengers daily - The Modern Taxi Scheme, a Public-Private Partnership presently comprising 6 (six) operators and 1,455 cabs - The development of the waterways and the introduction, through a Public-Private Partnership, of three pilot routes in the State - Lekki to Marina, Ikorodu to Marina and Badagry to Marina (via Mile 2). The State has indicated its commitment to construct jetties and passenger waiting rooms at embarkation and disembarkation points.
Photo: BRT Buses
3. Power/Water Supply
. The State is presently undertaking the following: - A 12 megawatt Independent Power Plant project, in respect of which a pipeline is presently being reticulated to access the gas grid - Construction of 15 micro-water works with an additional capacity of 30 million gallons, which will provide a combined daily capacity of 60 million gallons
23 4. LAGOS STATE
4. Environment/Physical Planning
. Unveiling of 10-year development plan for Ikeja Model City . Evolving measures to curb unguided urban growth and proffer measures and standards aimed at positioning Lagos as a global mega city
5. Health
. Commissioning of 104-Bed Bola Tinubu (BT) Paediatric, Lagos State University Teaching Hospital (LASUTH) . Commissioning of BT Health and Diagnostic Centre, LASUTH . On-going construction of Renal care Hospital, Gbagada . On-going construction of Maternal Child Care Centres in Ikorodu, Mushin, Surulere, Isolo and Ifako Ijaiye . 57 new ambulances for Health Care Centres . Fully equipped Field Hospital . 10 Mobile Intensive Care Units
6. Education
. Rehabilitation and Construction of classrooms . Continued development of human capital . Distribution of free text books . Re-introduction of Voluntary Organisations in schools
7. Employment
. The creation of 156,779 jobs between January and June 2009 comprising: - Field training, micro credit finance and business support (52, 685 employed) - Construction, waste management and beatification (98,000 jobs created) - State Public Service, Health and Education sectors (6,114 entry level positions)
8. Food Security
. Inauguration of State Steering Committee on Nigeria-African Stockpile Programme . Marine Agriculture/Fisheries Development . Artisanal Fisheries Development/Replenishment of Open water Bodies . Integrated Livestock Expansion . Resuscitation of Tractor Hiring Unit . Root and Tuber Expansion Projects
9. Shelter
. Upgrade of slums through Lagos Metropolitan Development and Governance Programme (LMDGP), ongoing in the following communities - Agege, Ajegunle, Amukoko, Badia, Iwaya, Makoko Ilaje Bariga and Ijeshatedo . Stricter implementation of building regulations to forestall building collapses . Construction of 2000 Housing Units in 7 locations (in 2008) . Proposed construction of 20,000 housing units in 10 locations through Public-Private Partnership . Protection of tenants through proposed legislation
24 4. LAGOS STATE
10. Revenue Enhancement
. Improving Tax Collection Mechanisms . Simplifying Tax Identity and recognition of tax payments . Tax Accountability
4.4. GOVERNANCE AND BEST PRACTICES
Lagos State has created an enabling environment to aid the successful implementation of the state’s economic program by institutionalising good governance and best practice. Consequently, the State has introduced appropriate policy environments, including:
. State Overriding Policy Thrust
- Poverty alleviation - Sustainable economic growth
. Aspects of Policy Thrust
- Re-definition of the role of government - Promotion of a private sector-led economy - Sustenance of good governance through inclusive governance, accountability and transparency, rule of law, public sector reform and increased Public Private Partnerships (“PPP”) - Increasing access of the people to quality basic social services - Defence of true fiscal federalism
4.5. MEDIUM TERM STRATEGY OF THE STATE
Lagos State, being the hub of the nation’s industrial and commercial activities, continues to witness a massive influx of people from other parts of the country on an annual basis. This has led to a surge in its population with the attendant strain on its social and physical infrastructure, the rapid emergence of slums, conurbations and consequently, severe environmental degradation. The effect of this growth is also felt in neighbouring States of Ogun and Oyo. In order to combat these challenges and boost economic development, the Lagos State Government has developed a Medium-Term Strategy (“MTS”) that seeks to increase investment in socio-economic infrastructure that will achieve significant growth and sustainable urban renewal and development of the State through collaboration with stakeholders. The implementation of the 10-point agenda, which encapsulates the MTS, is intended to address the issues of accelerated economic growth and sustainable urban development.
4.6. FINANCES OF LAGOS STATE
Lagos State’s financial profile has continued to improve. The robust and resilient nature of the state’s finances is demonstrated by the minimal impact of increasingly dipping statutory allocations to states within the Federation, due to the fall in oil prices. Furthermore, and more importantly to Lagos State, Internally Generated Revenue (“IGR”) continues to grow quite significantly. As at March 2009 oil receipts to the Federation Account had declined by 39.5% compared to the preceding quarter*; whilst statutory disbursements in the same period were down 18%; when compared to the same period last year.
* Source: Central Bank of Nigeria – Economic Report for Q1 2009 25 4. LAGOS STATE
Statutory Allocation (2004 2009*) Internally Generated Revenue (2004 2009*)
N' Billion N' Billion 160 50 120 40 30 80
20 40 10
‐ ‐ 2004 2005 2006 2007 2008 2009* 2004 2005 2006 2007 2008 2009*
* Annualized figure based on H1 2009 results * Annualized figure based on H1 2009 results Source: Lagos State Source: Lagos State
The State’s income profile in 2008 indicates that IGR was the main source of revenues at 76%, with Statutory Allocations representing approximately 24%, increasing to 82:18 (IGR: Statutory Allocation) as at June 2009. Infrastructure renewal and respective public-private sector partnerships are creating and providing a more conducive living environment for Lagosians, prompting greater tax responsibility amongst residents in the state. As the government continues to execute programmes under the Ten-Point Agenda - and has been demonstrated – there is the expectation that the State’s revenue profile will be further enhanced.
Capital Expenditure (2004 2009*) N' Billion 200
160
120
80
40
0 2004 2005 2006 2007 2008 2009* Capital Expenditure Total Revenue
* Annualised based on H1 2009 results
The finances of Lagos State will be further enhanced by proposed funding through The World Bank’s Development Policy Operation (“DPO”). A DPO is one of the means by which The World Bank funds development and provides untied, direct budget support to governments for policy and institutional reforms aimed at achieving a set of specific development results; enabling the World Bank to provide rapid financial assistance to allow recipients manage actual or anticipated development financing requirements of domestic or external origins.
The DPO will typically support the achievement of a set of development results through a medium-term program of policy and institutional actions consistent with a country's economic and sectoral policies. A DPO can be stand-alone operations or more frequently part of a programmatic series of operations. In programmatic operations, the World Bank supports the implementation of a medium-term program of policy reforms through a series of annual operations, each of which is disbursed against a mutually agreed set of policy and institutional actions. They typically consist of a programmatic series of three annual operations.
26 4. LAGOS STATE
Eligibility for the DPO requires agreement between the World Bank and the recipient on monitorable policy and institutional reform actions, and maintenance of a sound macroeconomic policy framework. Lagos State has been assessed as qualifying for DPO and discussions are at an advanced stage.
Through the DPO, Lagos State will be provided with N45 Billion (Forty-Five Billion Naira) in budget support by the World Bank which will preserve the state’s fiscal sustainability. The DPO will be channeled by means of budget support, thus enhancing LASG’s finances though greater fiscal sustainability as well as multi-lateral support for the state’s programmes. The 3 (three) tranche annual disbursements are expected to commence in 2010.
Lagos State will be the first sub-national in Nigeria to be granted a DPO by the World Bank once the terms of the funding is finalised. The DPO is subject to Lagos State obtaining the approval of the Federal Ministry of Finance.
4.7. THE DEBT ISSUANCE PROGRAMME
Statutory Background
The Lagos State Government has duly complied with the legal framework established in Nigeria for capital raising by State Governments, as contained in the Investment and Securities Act (“ISA”) of 2007. In accordance with the ISA, the Lagos State House of Assembly enacted the Bonds, Notes and other Securities Issuance Law 2008 of Lagos State (“the Bonds Law”) which empowers the Lagos State Government to borrow money from the Capital Market to finance developmental projects.
Any external borrowings that will be made by the Lagos State Government under the N275 billion Bond Issuance Programme will require the prior approval of the Federal Government as required by Section 21 (2) of the Debt Management Act 2003 and Section 47 (3) of the Fiscal Responsibility Act 2007.
Security Trust Structure
The provisions of the ISA seek to protect the interest of investors by requiring either that an Issuing State Government secure an Irrevocable Standing Payment Order (“ISPO”), a quasi-guarantee that mandates deductions by the Federal Accountant-General of outstanding interest and/or principal from Statutory Allocations due to the State (although only in the event of a default in payment by the State) for purposes of servicing these payments; or that the Issuing State Government provides evidence of adequate security in respect of the obligations of outstanding interest and/or principal. Furthermore, the Issuing State Government is mandated to establish a Sinking Fund that is funded from the State’s consolidated revenues.
The provisions of the Bonds Law mandate the Lagos State Government to establish a Consolidated Debt Service Account (“CDSA”) for the purposes of servicing the State’s debt obligations arising from the Debt Issuance Programme. The State has raised other debt through the banks but such debt cannot be serviced from the CDSA as the Law contains no provision for the settling of bank and other debt. The CDSA is funded on a regular basis by 15% of the State’s monthly internally generated revenues; with the Bonds Law stipulating that the funding of the CDSA can be augmented by the State House of Assembly at the request of the Executive Council. In addition, the Bonds Law stipulates that a Sinking Fund must be established for each Bond series issued by Lagos State; with the Sinking Fund being funded from the CDSA. The Sinking Fund is managed by Trustees who shall utilise its proceeds to service both interest and principal payment obligations of the State. The Trust Deed executed between the Trustees and the State regulates the relationship between the parties and the Trustees Rules set out the obligations of the Trustees.
Presently, the quarterly sum of N4,500,000,000.00 (Four Billion Five Hundred Million Naira) is credited to the CDSA. The balance of the CDSA as at July 31, 2009 was N7,632,399,000.00 (Seven Billion Six Hundred and Thirty Two Million Three Hundred and Ninety Nine Thousand Naira), of which N3,250,000,000.00 (Three Billion Two Hundred and Fifty Million Naira) was paid out on August 9, 2009 as coupon payments on Series 1 Bonds. The second Coupon Payment on Tranche 1 Bonds - amounting to N3,250,000,000.00 (Three Billion Two Hundred and Fifty Million Naira) - was paid on February 9, 2010.
All coupon and principal payments arising in respect of the bonds that are issued under the Nxx Billion Series 2 [2010/2017] of the Debt Issuance Programme shall be secured on the revenues of the Lagos State Government. The
27 4. LAGOS STATE
Lagos State Government has not issued an ISPO in respect of this Series 2 Issuance. Consequently, the Bonds will not be backed by an ISPO
4.8. The N50 Billion Fixed Rate Bond Issuance (Series 1)
Lagos State launched the Debt Issuance Programme with the successful issuance of a N50 billion Bond (“the Series 1 Bonds”). The Series Bonds were offered by way of a Public Offer in December 2008 and at the conclusion of the transaction in February 2009, recorded a 117.93% subscription.
The Series 1 Bonds are a five (5) year, fixed rate instrument. The coupon on the Bond is 13% per annum, payable semi-annually in August and February until maturity on February 9, 2014.
4.9 Update on Use of Proceeds (Series 1)
The N50 Billion Bond raised by the Lagos State Government has been expended as indicated below; that is, in refinancing outstanding loans on infrastructure projects, mobilizing contractors and advancing on-going projects particularly additional ‘special projects’ being undertaken by the state in furtherance of establishing Lagos as a mega-city.
Use of Proceeds* Amount (N) Finance ongoing infrastructure projects 25,747,331,194 Refinance loans on ongoing infrastructure projects 23,783,783,784 TOTAL 49,531,114,978
4.9.1 Infrastructure Projects Financed from N50 Billion Bond
Key infrastructure projects financed by the N50 Billion Bond issued in the first tranche of the debt issuance programme are listed below:
Projects Amount (N) Construction of Roads (Lagos-Badagry Dual Carriage Road, Lekki-Ikoyi Bridge, Unity Road, Alimosho) 13,546,897,074 Construction and rehabilitation of Public Schools 1,325,292,961 Construction of Housing Units 529,822,402 Supply and Installation of Medical Equipment 1,372,908,143 Construction of Otta-Ikosi Regional Water & Waterworks 1,826,943,680 Consultancy Fees for projects (Light Rail, Roads) and Other Expenses 5,592,598,418 Repair& Landing of Jetties 954,769,300 Dredging (Ikorodu) & Drainage 598,099,217
TOTAL 25,747,331,194
4.9.2 Special Projects
The Lagos State Government has also expended amounts from the proceeds of the first tranche of the Programme in advancing the following:
Lagos Urban Rail Mass Transit (LRMT) Scheme (Iddo to Ijoko via Okokomaiko and Marina)
The Lagos Mega City Development Authority is undertaking the Light Rail Mass Transit (LRMT) scheme which will introduce a Light Rail Transit System (within the existing Nigerian Railway Corporation corridor) from Iddo in Lagos State to Ijoko in Ogun State. The scheme, approximately 35-kilometres in length, is a priority project being
* representing the net amount received by the Issuer (less cost of issue of the bond), inclusive of accruing interest directed to be paid by the Securities & Exchange Commission 28 4. LAGOS STATE implemented within the mega-city. It is anticipated that a minimum of 500,000 passengers per day will use the LRMT system.
Under the LRMT, the Lagos State Government is constructing two intra city light rail routes with the first one commencing from the western axis in Okokomaiko to the Lagos Central Business District (CBD) and the second from Iddo to Ijoko in Ogun state. The rail routes are due for delivery by 2011. The introduction of the LRMT will:
re-establish and enhance rail transportation as an integral alternative mode of transport; assist in alleviating the existing traffic gridlock associated with the road network along the Badagry Expressway by providing additional passenger transport capacity; achieve efficient movement of passengers, with a travel time of 23 minutes during peak traffic periods (between Mile 2 and Okokomaiko). boost economic activities in the state and particularly along a corridor already renowned as the major commercial centre in the West African region. reduce the demand of approximately 13,000 Danfo vehicles (commercial buses) along the corridor
Lekki to Ikoyi Link Bridge
A bridge linking Lekki with Ikoyi is presently under construction. The 1,300 metre long suspension bridge links Lekki Peninsula (through Scheme I via Admiralty way) to Alexander/Osborne Road in Ikoyi, thus traffic heading to Ikoyi will connect directly without going through the perennial congestion in Victoria Island. This suspension bridge will be the first in West Africa.
Rehabilitation of Lagos - Badagry Expressway
The Lagos - Badagry Expressway, renowned as the major gateway to the West African region, is currently undergoing a multi-billion-naira, multi-phase rehabilitation scheme. The construction is expected to produce a 10- lane carriageway with a light rail and two-service lanes on each side when completed. The construction work on this project commenced recently. Lekki Free Trade Zone Lekki Free Trade Zone (LFTZ) is a public-private partnership, three-phased development aimed at building up a modern industrial city in Lagos under the leadership of the Lagos state government; thus creating a new, vigorous and multi-functional international satellite town in Lagos.
Upon its completion in 2009, the phase-I project will have an industrial park highlighting light industries, textiles, building materials, household electric appliances, communications and machine processing.
The phase-II and Phase-III projects, will cover 150 sq. km with a total investment of US$5 billion, focusing on heavy industry manufacturing, chemicals, petroleum processing, pharmaceuticals, automobiles, logistics, import/export businesses, deep-water port, tourism, real estate, education, banking and finance.
The Competitive advantages of LFTZ include its connection to major international waterways via the Atlantic Ocean and the Gulf of Guinea; access to the largest consumer market in Africa, with over 500 million potential customers in Lagos and access to abundant natural resources such as Oil, Natural gas, Timber, Rubber, Cocoa, Arabic gum and Sesame seed.
When completed and fully operational, LFTZ will offer more than 300,000 jobs and further enliven economic activities in the centre of excellence, Lagos.
4.10 Conclusion
The Lagos State Government is rigorously pursuing the implementation of its Ten-point agenda, concerning itself with delivering to the citizenry a transformed Lagos, Africa’s model Mega city and a world class city state.
29
5. RISK & MITIGATING FACTORS
An investment in Bonds involves a degree of risk. Accordingly, prospective investors should carefully consider the following risk factors together with all of the other information included in the Shelf Prospectus, this Supplementary Shelf Prospectus and any other Pricing Supplement before purchasing the Bonds. The risks below are not the only risks facing the State. Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also materially and adversely affect the State. Any of the following risks could result in a material adverse effect on the State’s financial condition, results of operations and ability to service debt, including the Bonds. These risks may also have a material adverse effect on the revenue, costs and other estimates and assumptions made for purposes of the financial model shown in this Prospectus, causing actual operating results to be materially lower than those reflected in the financial model. a. Political Risk Since independence in 1960, Nigeria has experienced periods of political instability. Following 16 years of military rule, a democratic government was reinstated in 1999 following the election of the Obasanjo government. The subsequent transition of power from President Obasanjo to President Umar Musa Yar’Adua in 2007 marked the first time in Nigeria’s history that power had been handed democratically from one elected government to another. Although there are strong indications of a maturing democracy in Nigeria some risks remain. The occurrence of an event of political instability, at either State or National level, could result in the termination of the Government’s mandate or the appointment of a new administration that may not be inclined to continue with the existing debt programme.
Mitigating Factor: The political instability that previously characterised Nigeria has been greatly reduced. Furthermore, the strengthening of political and judicial institutions suggests that democratic governance is being entrenched. b. Currency Risk A number of the projects that are to be executed may involve a foreign currency component either in terms of the cost of manpower and equipment or other foreign denominated elements required for the execution of such projects. Fluctuations in the value of the Naira can therefore make the costs of projects more expensive than currently projected, thus impacting negatively on the government’s ability to complete the projects within the existing financing structure.
Mitigating Factor: Although the Naira has experienced some volatility in recent times; and the economic meltdown and declining oil prices has resulted in a fall in Nigeria’s external reserves, the Central Bank of Nigeria remains proactive in effectively managing both the exchange rate and Nigeria’s foreign currency reserves. c. Specific Risk – Internally Generated Revenues The State will rely on Internally Generated Revenues to meet coupon and principal re-payment obligations in respect of the Bond issuance. The Internally Generated Revenues may not attain the projected growth rate and thus impact the State’s ability to pay accruing coupons and redeem the Bonds as and when due. The State has not issued an ISPO in respect of the Series 2 Bonds. The deduction in respect of the Sinking Fund will be a first charge with full commitment on the CDSA of the State.
Mitigating Factor: Lagos State plans to meet its debt service obligations solely from the Consolidated Debt Services Account (“CDSA”). This is a dedicated, internally segregated account into which 15% (or as presently, a minimum of N2.3 billion monthly) of the State’s internally generated revenues will be paid on a monthly basis. The Sinking Funds created for each bond issued by the State are funded from the CDSA and managed by the appointed Independent Trustees. Consequently, funds from the CDSA will be credited to the Sinking Fund -Series 2 that will be established to meet debt service obligations on the Bond.
The State’s Internally Generated Revenues has continued to grow quite significantly (as indicated earlier); most especially in light of the respective infrastructural projects being executed. The resulting impact of these projects on the lives of citizens has led to higher tax compliance rates. In addition, the financial forecasts for the State are based on modest assumptions and do not also take into account certain events which could increase the revenue profile of the State significantly.
30 5. RISK & MITIGATING FACTORS d. Credit Risk The credit risk of any bond is that the issuer will default in its obligations and consequently, neither interest payments nor the re-payment of the principal at maturity would occur.
Mitigating Factor: The track record of Lagos State in fulfilling obligations created through a Bond issuance is impeccable, the State having previously retired two bonds without default. The 15% of the State’s internally generated revenues paid into the CDSA can be increased by the State Assembly on the application of the State Executive Council in the event of insufficient balances in the Sinking Fund(s).
In addition, the finances of Lagos State will be further enhanced by proposed funding through The World Bank’s Development Policy Operation (“DPO”). The DPO enables the World Bank to support the implementation of a medium-term program of policy reforms through a series of annual operations, each of which is disbursed against a mutually agreed set of policy and institutional actions. The DPO will provide N45 Billion (Forty-Five Billion Naira) to Lagos State in budget support thus preserving the state’s fiscal sustainability. The 3 (three) tranche annual disbursements are likely to commence in 2010. e. Interest Rate Risk Changes in market conditions may adversely affect the value of the bonds, with the bonds being unattractive to investors; and prevailing rates more attractive than the coupon on the issued Bonds.
Mitigating Factor: Bonds issued under the Programme will be benchmarked to Federal Government of Nigeria bonds which have enjoyed relative rate stability. Investors may also choose to hedge against interest rate risks by a variety of means including interest rate swaps. f. Liquidity Risk An active trading market may not exist for the Bonds, and even when developed, may be subject to price fluctuations.
Mitigating Factor: The Bonds will be listed on the Nigerian Stock Exchange. In addition Lagos State has appointed Primary Dealers charged with creating a market for the Bonds by constantly providing two-way quotes (buy and sell prices) to investors, thus enhancing liquidity. The Issuer cannot however predict whether an active market in the Bonds will develop.
Should active trading in the Bond commence, the Bonds could trade at prices that are either higher or lower than the issue price depending on factors such as prevailing interest rates, the state’s finances, the ratings assigned to the Bond and Issuer and the market for similar debt securities issued by other sub-nationals. g. Environmental Risks Natural disasters may have an impact on the expected revenue streams or destroy some of the projects being constructed. This would have a negative impact on the projected cash flows expected to be generated by the State. There may also be negative environmental impacts of respective projects proposed by the Lagos State Government.
Mitigating Factor: Environmental impact analyses for prospective projects will be undertaken, negative impacts identified, and the measures for managing such impact will be proposed and applied. Furthermore, any impact on projected cash flows is mitigated by the fact that the State will service its obligations under the Bond from IGR which is not project specific. h. Regulatory Environment The Statutory and Regulatory environment will change and the policies that have created an enabling environment for the issuance of the Bonds will be amended.
Mitigating Factor: The Federal Government and the respective regulators are committed to creating and sustaining an investment-friendly environment governed by stable policies.
31
6. FINANCIAL FORECAST
6.1. REPORTING ACCOUNTANTS’ REPORT
The following is a copy of the letter on the revenue and expenditure forecast by KPMG Professional Services, the Reporting Accountants to the Bond Issue.
Letter from the Reporting Accountants
The Executive Council Lagos State Government of Nigeria Alausa, Ikeja Lagos
October 30, 2009
Dear Sirs,
Report on Revenue and Expenditure Forecast
We have examined the accompanying revenue and expenditure projections of Lagos State Government of Nigeria (“the State” or “the State Government”) for Ten years to 31 December 2019 in accordance with the International Standard on Assurance Engagements (ISAE3400) applicable to the examination of prospective financial information. The Lagos State Executive Council is solely responsible for the forecast including the assumptions on which it is based.
Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the forecast. Furthermore in our opinion, the forecast is properly compiled on the basis of the assumptions made by the State Executive Council and is prepared on a basis consistent with accounting policies normally adopted by the State. Actual results are likely to be different from the forecast since anticipated events frequently do not occur as expected and the variation may be material.
Finally, we emphasise that the forecast information is not intended to, and does not, provide all the information and disclosures necessary to give a fair presentation of the results of the activities of Lagos State Government in accordance with the Constitution of the Federal Republic of Nigeria as amended 1989 and 1999; the Finance (Control and Management) Act of 1958; the Financial Regulation and Revenue Allocation Laws Applicable in Nigeria.
We have no responsibilities to update this report for events and circumstances after the date of this report.
Yours faithfully
KPMG Professional Services
32 6. FINANCIAL FORECAST
6.2. LETTER FROM THE JOINT FINANCIAL ADVISERS/ISSUING HOUSES
The following is a copy of the letter from the Joint Financial Advisers/Issuing Houses on the Financial Forecast:
April 19, 2010
The Executive Council Lagos State Government of Nigeria Alausa, Ikeja Lagos
Dear Sirs and Madams,
PROFIT FORECASTS We have discussed respectively with your good selves and Mr. O. O. Arowa, the Honourable Auditor-General, the bases and assumptions upon which the forecasts have been made and the accounting bases and calculations upon which the forecast was compiled.
Having considered the assumptions that have been made in preparing the forecasts as well as the accounting bases and calculations reviewed by Mr. O. O. Arowa, we consider that the forecasts (for which you all as members of the State Executive Council are solely responsible) have been made after due care and careful enquiry.
Yours faithfully, For: The Joint Financial Advisers/Issuing Houses
Chapel Hill Advisory Partners Afrinvest (West Africa) Limited Radix Capital Partners Limited Limited
FBN Capital Limited FCMB Capital Skye Financial Stanbic IBTC Bank Plc Zenith Capital Limited Markets Limited Services Limited
33 6. FINANCIAL FORECAST
6.3. REVENUE AND EXPENDITURE FORECAST
Funding (Naira billion) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Budget Revenues Internally Generated Revenues (IGR) 209 215 233 270 313 365 397 459 528 606 643 Total capital receipts excl borrowing 42 38 42 46 51 54 59 64 70 76 82 Statutory allocation 57 77 79 87 95 105 116 127 141 155 171 Paris Club exit allocation 0 0 0 0 0 0 0 0 0 0 0 Excess crude 19 0 1 2 3 4 6 9 15 24 39 Other income (dedicated) 4 5 6 7 8 9 11 13 15 17 20 Cash inflow from debt issuance programme 111 145 165 201 217 232 215 217 212 196 133 TOTAL REVENUES 442 480 526 613 687 769 804 889 981 1,074 1,088 EXPENDITURE Recurrent expenditure (159) (166) (183) (214) (251) (293) (320) (371) (429) (494) (529) Capital expenditure (246) (274) (300) (350) (382) (414) (417) (442) (466) (483) (457) Multilateral debt funding obligations (2) (2) (2) (2) (1) (1) (1) (1) (1) 0 0 Less: Transfer to CDSA from IGR (31) (32) (35) (41) (47) (55) (60) (69) (79) (91) (96) Less: ISPO deductions by Accountant - Gen (4) (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) TOTAL EXPENDITURE (442) (480) (526) (613) (687) (769) (804) (889) (981) (1,074) (1,088) Transfer to CDSA @ 15% of IGR (31) (32) (35) (41) (47) (55) (60) (69) (79) (91) (96) Annual deduction from statutory allocations (4) (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) Total transfers to CDSA (35) (38) (41) (47) (53) (61) (66) (75) (85) (97) (102) Cumulative Transfer to CDSA (73) (114) (161) (214) (275) (341) (416) (501) (598) (700) CONSOLIDATED DEBT SERVICE ACCOUNT (CDSA) Opening balance of CDSA 0 37 95 159 232 299 378 466 568 686 822 Additions to CDSA from IGR 31 32 35 41 47 55 60 69 79 91 96 Additions from ISPO 4 6 6 6 6 6 6 6 6 6 6 World Bank loan 0 15 15 15 0 0 0 0 0 0 0 Interest earned on CDSA 2 5 8 11 14 18 22 27 33 39 46 CDSA before debt service 37 95 159 232 299 378 466 568 686 822 970
34 6. FINANCIAL FORECAST
6.4. ASSUMPTIONS
Bases
The forecasts for the years ending 31 December 2009 - 2019 have been prepared on the basis consistent with Government Accounting Policies.
Assumptions
The following assumptions were applied in the preparation of the revenue and expenditure forecast:
1. There will be no significant changes in Federal and State Governments’ monetary and fiscal policies during the forecast period that will adversely affect the State;
2. The Federation Account, Value Added Tax and Excess Crude Oil Account revenue sharing formula would not alter significantly from those used in preparing the projections;
3. The benchmark price of crude oil is projected to increase from $55 to $61 between 2009 and 2014;
4. Nigeria’s current crude oil production level is forecasted to remain stable;
5. The Federal Government fiscal policies will not have a negative impact on income realisable from VAT allocation;
6. The statutory allocation will increase by a CAGR of 13.12% over the forecast period;
7. There will be an increase of 19% in internally generated revenue over the forecast period;
8. Personnel and overhead costs will increase by 10% annually;
9. A minimum of 15% of internally generated revenue (IGR) will be transferred yearly into the Consolidated Debt Service Account for servicing of debt obligations from the Bond Programme;
10. Capital expenditure projection is based on surplus fund during the period;
11. Proceeds from the Bond issue will be received in the last quarter of 2009;
12. The Bond’s interest payments shall accrue semi-annually to a Sinking Fund Account. The first payment of interest shall be made in the first quarter of 2010 and will be paid semi annually throughout the tenure of the Bond;
13. The inflation rate of Nigeria over the forecast period will average 7% annually;
14. The growth rate in Real Gross Domestic Product (GDP) over the forecast period will average 6.0% annually; and
15. The economic and political climate of Nigeria will remain stable.
35
7. FINANCIAL SUMMARY
7.1. REPORTING ACCOUNTANTS’ REPORT
The following is a copy of the letter on the revenue and expenditure forecast by KPMG Professional Services, the Reporting Accountants to the Bond Issue.
The Executive Council Lagos State Government of Nigeria Alausa, Ikeja Lagos
October 30, 2009
Dear Sirs,
We have examined the audited financial statements of Lagos State Government (“the State”) for the five years ended 31 December 2004, 2005, 2006, 2007, 2008 and half year as at 30 June 2009.
The financial statements, which have been prepared under the cash basis, were reported upon by the Auditor- General of the State in line with Section 125 (5) of the 1999 Constitution of the Federal Republic of Nigeria.
The financial statements on which the financial information is based are the responsibility of the State Executive Council who approves their issue. Our responsibility is to issue a report on the financial information based on our review. The State Executive Council is also responsible for the contents of the prospectus in which this report is included.
Our review was aimed at obtaining moderate assurance as to whether the financial statements are free from material misstatement. The review was limited primarily to inquiries from the representatives of the State Executive Council, analytical procedures applied to financial data and a review of evidence obtained by the Auditor-General on those financial statements, and therefore provide less assurance than an audit. We have not performed an audit, and accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial information does not give a true and fair view of the state of affairs of Lagos State as at the dates of the Statement of Assets and Liabilities stated and of its revenue and expenditure for each of the years then ended, in accordance with the Constitution of the Federal Republic of Nigeria.
Yours faithfully,
KPMG Professional Services
36 7. FINANCIAL SUMMARY
7.2. STATEMENT OF ASSETS AND LIABILITIES
N’ Million Notes June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004 Assets Cash 1 43,189 36,708 27,656 11,917 7,074 17,561 Investments 2 8,326 8,407 5,150 12,823 12,823 5,511 Special Funds 3 6,838 14,783 9,057 8,055 33,271 12,717 Total Assets 58,353 59,898 41,863 32,795 53,168 35,789
Financed By Consolidated Revenue Fund 4 21,078 14,684 12,909 8,193 19,506 6,284 Capital Expenditure and Development Fund 5 5,088 4,979 5,491 9,982 23,489 26,862 Scholarship Fund 63 61 80 49 36 37 Special Funds 6 30,892 39,076 23,697 14,411 10,367 2,606 Treasury Clearance Accounts 1,232 1,098 (314) 160 (230) - 58,353 59,898 41,863 32,795 53,168 35,789
7.3. STATEMENT OF REVENUE AND EXPENDITURE
N’ Million Notes June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004 REVENUE Statutory Allocation 7 16,906 41,180 35,755 33,426 27,381 22,639 Recurrent Revenue 8 102,971 161,752 105,668 78,072 52,751 44,335 Other Income 2,105 8,596 - 3,967 - - Total Revenue 121,982 211,528 141,423 115,465 80,132 66,974
EXPENDITURE Consolidated Revenue Charges - 55 64 37 30 38 Other Recurrent Expenditure 9 55,588 122,533 108,998 100,349 54,769 43,169 55,588 122,588 109,062 100,386 54,799 43,207
Surplus/(Deficit) of Revenue over Expenditure 66,394 88,940 32,361 15,079 25,333 23,767 Transfer to/(from) Consolidated Development Fund (60,000) (87,165) (27,645) (26,392) (12,111) (10,337) Transfer to/(from) Consolidated Revenue Fund 6,394 1,715 4,716 (11,313) 13,222 13,430
7.4. NOTES TO THE FINANCIAL STATEMENTS
1 CASH AND BANK BALANCES N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Sub Treasuries 24,795 23,713 27,913 9,736 4,678 14,762 Less: Remittance within Lagos State (7,506) (6,715) (3,189) 8 (145) 69 17,289 16,998 24,724 9,744 4,533 14,831 Special Deposit with Banks 25,222 19,032 1,975 942 1,206 2,694 Personal Advances Fund 650 650 923 1,196 1,299 - Deposit in J.C.F 28 28 34 35 36 36 43,189 36,708 27,656 11,917 7,074 17,561 37 7. FINANCIAL SUMMARY
2 INVESTMENTS N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Quoted Investments 8,326 8,349 4,802 523 523 527 Unquoted Investments 58 348 12,300 12,300 4,984 8,326 8,407 5,150 12,823 12,823 5,511
Market Value of quoted investments 8,326 20,578 4,802 2,562 2,562 2,305 The balance in the Stmt of Assets and Liabilities excludes unquoted investment
3 SPECIAL FUNDS N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Pension Fund 1,226 1,226 1,225 1,189 1,114 371 Treasury Clearance Fund 5,612 13,557 7,832 6,866 32,157 12,346 6,838 14,783 9,057 8,055 33,271 12,717
4 CONSOLIDATED REVENUE FUND N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
As at January 1 14,684 12,909 8,193 19,506 6,284 (7,146) Transfer to/(from) Revenue & Expenditure Account 6,394 1,775 4,716 (11,313) 13,222 13,430 21,878 14,684 12,909 8,193 19,506 6,284
CAPITAL EXPENDITURE & 5 DEVELOPMENT FUND N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
At 1 January (105,717) (55,117) (26,747) 1,041 16,525 27,595 Transfer from/(to) Revenue & Expenditure account 60,000 87,165 27,645 26,392 12,111 10,337 Other Capital Receipts (Note 5.1) 51,341 66,306 51,522 6,574 476 3,854 116,320 158,962 89,149 56,455 39,449 41,786 Capital Expenditure (Note 5.2) (111,232) (153,983) (83,658) (46,473) (15,960) (14,924) 5,088 4,979 5,491 9,982 23,489 26,862
38 7. FINANCIAL SUMMARY
5.1 OTHER CAPITAL RECEIPTS N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Internal Loan 12,031 31,178 4,400 - - External Loan - - - - - Below the line - - 1,460 - - Capital Contributions - - 714 - - Bond issue 50,000 52,500 - - - - Grants and Reimbursements 1,775 869 - 476 3,854 Proceeds from Sales of Investment - 19,475 - - - Other capital receipts 1,341 - - - - - TOTAL 51,341 66,306 51,522 6,574 476 3,854
5.2 CAPITAL EXPENDITURE N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Crop - - 70 47 53 81 Livestock - - 4 5 1 1 Forestry - - 11 3 - 1 Fisheries - - 34 4 4 0 Ministry of Agriculture 382 150 119 59 58 83 Rural Development 1,210 2,312 1,756 546 381 551 Manufacturing - - 0 1 2 8 Power (works) 1,350 - 1,045 412 19 194 Electricity Board - - 1,875 2,255 48 35 Commerce and Tourism 1,756 1,983 2,533 227 72 28 Works - 5,747 27,530 14,781 3,848 2,756 Public Works Bureau - - 4,351 1,986 1,660 454 Transportation 503 3,235 3,985 4,178 556 239 Education 3,440 7,490 4,201 2,122 1,576 125 Health 3,608 9,151 4,625 1,691 1,654 337 Hospital Management Board - - - - - 2 Information Services 211 435 1,001 1,557 133 37 Sports and Culture - - 864 1,145 20 15 Youths and Social Development 282 1,953 328 434 33 13 Community Development - - 472 247 119 71 Subeb - - 96 - - - Water Resources and Supply - 1,488 1,531 758 264 3 Environmental Sewage and Drainage 4,061 10,188 4,927 843 420 720 Urban and Regional Planning 265 115 3,166 1,070 209 400 Housing 2,940 3,930 520 458 281 917 Lands Bureau 884 - 2,631 1,784 77 3,872 Civil and LG service commission 43 47 - - - - Ministry of Finance and STO 3,363 1,707 - - - -
39 7. FINANCIAL SUMMARY
Ministry of Justice & Judicial Service 695 1,681 - - - - Ministry of Home Affairs 126 572 - - - - House of Assembly 261 228 - - - - Ministry of Economic Planning & Budget 12,589 11,269 - - - - Ministry of Local Government 144 246 - - - - Office of Auditor-General 8 3 - - - - Ministry of Special Duty & Liaison 33 1,090 - - - - Ministry of Establishment, Pension & Training - 16 - - - - Public Service, Chieftaincy & Boundary matters 93 291 - - - - LASG parastatals and CBD 11,483 22,531 - - - - Ministry of Science & Technology 701 2,356 - - - - Office of Chief of Staff and MV Admin 230 435 - - - - Office of Infrastructure 20,985 52,972 - - - - Ministry of Women Affairs 351 660 - - - - Surveyor General - 10 - - - - General Administration - - 9,369 2,908 1,251 1,133 Special Expenditure 4,076 4,549 5,997 3,289 2,586 2,375 Counterpart Funding 144 1,084 617 763 635 473 Below the line - - - 2,900 - - Others 35,015 4,059 - - - - TOTAL 111,232 153,983 83,658 46,473 15,960 14,924
6 SPECIAL FUNDS N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Government Staff Housing Fund - 1 4 0 22 6 Treasury Clearance Fund 25,079 33,182 21,042 4,316 237 481 TESCOM Staff Housing Fund 5 5 9 10 4 7 TESCOM Advances Fund 2 3 3 6 2 6 Staff Vehicle Refurbishment Revolving Loan 8 8 8 2 26 42
Vehicle Refurbishment Revolving Loan – lawyers 1 1 1 1 1 1 ECONET & UNIPETROL Share Purchase Fund 5,797 5,876 2,630 10,076 10,075 2,063 TOTAL 30,892 39,076 23,697 14,411 10,367 2,606
7. STATUTORY ALLOCATION
This represents Lagos State Government’s share of the revenue collected and distributed by the Federal Government. The basis of allocation varied over the years and the most current, which is in accordance with the Finance (Control and Management) Act Cap F26 LFN 2004 is as follows:
% Federal Government 46.87 State Governments 23.77 Local Government Areas 18.33 13% Derivative Fund 9.71 Deductions: Cost of Collections 1.31
Source: www.fmf.gov.ng (February 2009 Statutory allocation) 40 7. FINANCIAL SUMMARY
8 RECURRENT REVENUE N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Taxes 65,734 101,178 65,975 50,170 32,500 23,293 Proceeds from VAT 19,250 32,165 22,645 16,092 12,111 10,337 Fines and fees 5,746 9,376 7,485 6,350 5,208 5,153 Licences 1,340 1,752 992 843 630 1,270 Earnings and fees 1,455 3,984 3,109 1,977 1,574 1,662 Rent on government properties 335 741 408 171 64 700 Interest repayment and dividend 1,489 3,906 1,609 537 530 18 Reimbursement/Grant, contributions 1,430 1,079 8 7 6 6 Miscellaneous 2,463 7,571 3,437 1,625 128 1,896 Con Rev 3,729 - - - - - TOTAL 102,971 161,752 105,668 78,072 52,751 44,335
OTHER RECURRENT 9 EXPENDITURE N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Personnel cost 20,795 40,499 33,118 22,140 19,532 16,002 Overhead cost 32,928 66,015 61,128 63,693 34,019 13,972 Grants, contributions and subventions 1,861 16,019 14,752 2,532 1,218 1,241 Other expenditure 4 - - 11,984 - 11,954 55,588 122,533 108,998 100,349 54,769 43,169
10 CONTINGENT LIABILITIES
The Federal Government took over the management of all public sector external debt in 1995 and thus, debt servicing was treated as a first charge against the Federation Account. However, the Supreme Court’s judgement on the Resource Control suit declared such practice as unconstitutional and ruled that each tier of government must bear its own burden. Consequently, the Federal Government distributed the country’s external debt among the 36 states of which Lagos State’s share of the debt is about $190 million. The external debts were contracted between 1966 and 1993.
The claim is being contested by the State Government and it includes penalties and interest accumulated during the years of management by Federal Government. The above notwithstanding, the claim is being serviced by monthly deductions of about N171 million from the State’s statutory allocation. This repayment does not have a material impact on the finances of the State.
11. CLAIMS & LITIGATION
The Lagos State Government in its ordinary course of business is involved in 83 civil and criminal cases pending in the Court of first instance and in the Appellate Courts. The claims against Lagos State have an estimated monetary value of N11,871,847,847.97.
The State also has an exposure of N1.5 billion representing guarantees given in respect of loans obtained for various material contracts and commercial projects. According to the Attorney General of Lagos State, the State has good defence to these pending legal actions and none of the claims is likely to have any material or adverse effect on the State. 41 7. FINANCIAL SUMMARY
13 STATEMENT OF ADJUSTMENTS TO ASSETS AND LIABILITIES
1 CASH AND BANK BALANCES a Special Deposit with Banks N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Balance as per audited financial statements 25,392 20,652 3,618 2,589 2,849 2,694 Adjustments: Write off of cash trapped in distressed banks (170) (1,620) (1,643) (1,647) (1,643) - 25,222 19,032 1,975 942 1,206 2,694
b Remittances within Lagos States N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Balance as per audited financial statements (7,506) (6,715) (3,189) 8 (145) 69 Reclassification of doubtful remittances to sub treasuries 7,506 6,715 3,189 (8) 145 (69) 0 0 0 0 0 0
14 STATEMENT OF ADJUSTMENTS TO REVENUE AND EXPENDITURE ACCOUNTS
1 RECURRENT REVENUE AND EXPENDITURE a Recurrent Revenue N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Balance as per audited financial statements 83,721 129,587 83,023 61,680 40,640 33,998 Adjustments: Reclassification of Proceeds from VAT from other capital receipts 19,250 32,165 22,645 16,092 12,111 10,337 102,971 161,752 105,668 78,072 52,751 44,335
b Miscellaneous Income N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Balance as per audited financial statements 1,013 7,548 3,433 1,629 1,771 1,896 Adjustments: (Write-off)/Recovery of cash trapped in distressed banks 1,450 23 4 (4) -1,643 - 2,463 7,571 3,437 1,625 128 1,896
42 7. FINANCIAL SUMMARY
2 CAPITAL EXPENDITURE & DEVELOPMENT FUND
a Other Capital Receipts N’ Million June Dec Dec Dec Dec Dec 2009 2008 2007 2006 2005 2004
Balance as per audited financial statements 51,341 98,471 74,167 22,966 12,587 14,191 Adjustments: Reclassification of Proceeds from VAT to recurrent revenue - (32,165) (22,645) (16,092) (12,111) (10,337) 51,341 66,306 51,522 6,574 476 3,854
43
8. RATINGS REPORT
The following information is an extract from the Ratings Report prepared by Agusto & Co:
44 8. RATINGS REPORT
45
9. USE OF PROCEEDS
The costs and expenses of the Issue, which are estimated at approximately N1,711,587,500.00 or 2.98% of gross proceeds, are payable by the State. The proceeds of the Issue will be utilised as follows:
1. To part finance outstanding payments on some infrastructure contracts awarded by the State; and 2. To re-finance short term commercial bank loans as indicate below.
9.1 USE OF PROCEEDS
Use of Proceeds Amount (N) % Completion Period Finance ongoing infrastructural Projects 43,912,648,923.35 78.71% On-going Refinance Outstanding Loans 11,875,763,576.65 Immediate 21.29% TOTAL 55,788,412,500,00 100.00% * the net proceeds of N55,788,412,500.00 will be paid to the Issuer following the deduction of issue costs amounting to N1,711,587,500.00
9.2 SCHEDULE OF KEY INFRASTRUCTURE CONTRACTS AWARDED BY THE STATE
S/N Project Ministry/Agency Amount (N) % of Proceeds 1 Road Construction Office of Infrastructure 23,795,534,298.00 42.65% 2 Construction and Improvement of Drainage Systems Office of Drainage Services 5,816,997,000.00 10.43 3 Construction of Jetties Office of Infrastructure 4,605,122,625.35 8.25 4 Building and Refurbishment of Schools Ministry of Education 4,847,497,500.00 8.69 5 Building and renovation of Hospitals Ministry of Health 4,847,497,500.00 8.69 TOTAL 43,912,648,923.35 78.71%
9.3 LOAN RE-FINANCING
As indicated above, the State intends to utilise the sum of N11,875,763,576.65 (Eleven Billion Eight Hundred and Seventy-Five Million Seven Hundred and Sixty-Three thousand Five Hundred and Seventy-Six Naira Sixty-Five Kobo) in re-financing outstanding loan obligations.
Year Purpose of Loan Loan Amount (N) Repayment Amount (N) % of Proceeds 2008 Smart Card Ticketing 3,300,000,000.00 3,300,000,000.00 6.81% 2008 Acquisition of Skye Shares 3,575,763,576.65 3,575,763,576.65 7.38% 2008 Lekki Construction 5,000,000,000.00 5,000,000,000.00 10.31% Total 11,875,763,576.65 21.29%
46 9. USE OF PROCEEDS
9.4 SUMMARY OF PROJECTS
The following summarises the projects that are to be executed by the Lagos State Government from the proceeds of the bonds issued in Tranche 2:
A. Construction Projects
1. Construction of Okota-Itire Overhead Link Bridge & Road Work Phase 1 Clearing of carriage ways, site clearance, construction of culverts, pedestrian walkways, roundabouts, street and traffic lights.
2. Construction of Okota-Itire Overhead Link Bridge & Road Work Phase 2 Survey works, sub-soil investigation, site clearance and the provision of access and platform for piling and concrete works, the construction of roundabouts and the provision of street and traffic lights.
3. Construction of Old Otta Road, Agodo Community, Association Avenue and Shasha- Orisunbare-Ejigbo Provision of concrete walkway, earthworks, streetlight and service ducts.
4. Ijegun-Isheri Oshun (Jakande Estate) and Isolo (Bridge works) Clearing of carriage way, grading of earth road, provision of filling material, construction of bridge, access and platform for piling work.
5. Construction of Ajah/Badore Road Construction of service duct, street lighting and roundabouts.
6. Construction of Ajangbadi-Ilogbo-Elegba Road Construction of culverts and the provision of interlocking paving stones and lay- bys.
7. Dualization of Mobil Road, Apapa Construction of culverts, the provision of kerbs, provision and laying of Asphalt and provision of stone base.
8. Infrastructural Improvement of Yaba (Jibowu) to Iddo in Mainland L.G.A Phase II (Herbert Macaulay way, Aje Street, Montgomery Street, Commercial Avenue, Commercial road and Old Yaba Road) Comprehensive redevelopment plan involving the reconstruction of 37 roads in Yaba in phases and 6 pedestrian bridges at strategic locations. Road construction and expansion with provision for B.R.T lanes as well as ducts, drainages/walkways, street lights and traffic signs.
9. Reconstruction of Lagos-Badagry Dual Carriageway (Lot 1) Clearing of carriageway, relocation of services, earthwork, scarification of existing concrete and pavement surface, demolition of concrete structures, construction of drains and culverts, toll plaza and BRT depot. Traffic system management measures, road signs and traffic lights.
10. Completion of Road Rehabilitation and Maintenance of Ologun- Agbage V.I Rehabilitation of Olugun-Agbage road involving widening of the road and provision of walkway.
11. Ikorodu Road Rehabilitation and Maintenance Rehabilitation of service lanes -Idi Iroko (Lagos Bound), Idi Iroko- Jibowu (Lagos Bound), Jibowu- Idi Iroko (Ikorodu Bound), Idi Iroko- Mile 12 (Ikorodu Bound). 12. Blue (Rail Mass Transit) Line- Okokomaiko to Iddo Section Design and preparation of design and build contract documents for Blue Line (Okokomaiko to Marina), concession documents and selection of concessionaire, conduct of EIA construction to the Blue Line Section between Okokomaiko and Iddo (tracks and stations).
47 9. USE OF PROCEEDS
13. Blue/ Red Rail Line Lagoon Crossing to Marina Construction of the Blue/ Red Line Section between Iddo and Marina (via Ebute Ero) and including a suspension bridge across the lagoon.
B. Construction and Improvement of Drainage Systems
1. Construction of Old Otta Road, Agodo Community, Association Avenue and Shasha- Orisunbare-Ejigbo Clearing of carriage way and the construction of drains.
2. Construction of Ajah/Badore Road Site clearing, provision of drainage channels and culverts, filing materials.
3. Construction of Ajangbadi-Ilogbo-Elegba Road The clearing of carriageway, clearing of site, construction of various types of drains.
4. Dualization of Mobil Road, Apapa Clearing of carriageway, clearing of site, construction of various types of drains.
5. Construction of Old Otta Ibari Road Clearing of carriageway, clearing of site, construction of drains and culverts, the provision and laying of Asphalt and provision of stone base.
6. Construction of Roads Network, Epe Site clearance, construction of drains and culverts and the provision of Asphaltic concrete and service ducts.
7. Infrastructural Improvement of Yaba (Jibowu) to Iddo in Mainland L.G.A Phase II (Herbert Macaulay way, Aje Street, Montgomery Street, Commercial Avenue, Commercial road and Old Yaba Road) Comprehensive redevelopment plan involving the reconstruction of 37 roads in Yaba in phases and 6 pedestrian bridges at strategic locations. Road construction and expansion with provision for B.R.T lanes as well as ducts, drainages/walkways, street lights and traffic signs.
8. Rehabilitation/ Upgrading of Bola Ahmed Tinubu Avenue Alausa Ikeja Site clearing, scarification, earthworks, drainage works, provision of walkway, streetlights, road signs and markings, kerb painting and beautification works.
9. Rehabilitation of Dillion Street, Amuwo Odofin Site clearing, provision of filing materials and the construction of drainages and culverts.
10. Rehabilitation of Comfort Oboh Street, Amuwo Odofin Site clearing, provision of filing materials and the construction of drainages and culverts.
11. Rehabilitation of Samuel Ekundayo Street, Badagry Site clearance, earthwork, drainage works and the provision of service ducts
12. Rehabilitation of Irefun/Kufisile Street, Alimosho L.G.A Site clearance, earthwork, drainage works and the provision of service ducts
13. Rehabilitation of Abdullahi St, Amuwo Odofin Site clearance, scarification, earthworks, drainage works and the provision of service ducts 48 9. USE OF PROCEEDS
14. Construction of Olumokun/ Olayinka/ Sanusi/ Oduduwa Streets with Bridge Clearing of carriageway, removal and carting away of unsuitable materials from site, demolition of existing drains and culverts, the construction of various types of drains and culverts and the provision of diversion facilities for traffic and the construction of a bridge.
15. Construction of Wilmer Crescent/ Akipiri Str Wilmer & Osho Drive with Bridge Clearing of carriageway and site, demolition of existing drains and culverts, construction of various types of drains and culverts and the provision of diversion facilities for traffic and the construction of a bridge.
16. Construction of Fagbayi Road Network Clearing of carriageway and site and the construction of drains and culverts.
17. Rehabilitation of Olugbede, Wusamotu-Oreagba and Transformer Street in Alimosho Local Government Area Clearing of carriageway, earthwork, drainage works and the provision of street lights with generators
C. Construction of Jetties
1. Completion of Oworonshoki-Osborne Water Transportation Provision of reinforced concrete jetty, access bridge and road, refurbishment of terminal building, parking areas; and survey and dredging of terminal at Oworonsoki
2. Completion of Ebute- Ojo (LASU) to Marina via Ijegun- Egba and Mile 2 Provision of reinforced concrete jetty, access bridges and road, terminal buildings, parking areas, pontoons; and survey and dredging of terminals at Ebute-Ojo (LASU)- Marina.
D. Health Care Projects
1. Rehabilitation/Purchase of equipment for Oshodi Medicine Stores 2. Procurement of Equipment for Blood Certification Centre 3. Construction and equipping of 100 bed MCH complex at Lekki 4. Construction and equipping of Accident and Emergency Centre at Lekki 5. Construction and equipping of Accident and Emergency Centre at Ikorodu 6. Construction of drainage, internal roads, water reticulation and central power provision at LASUTH. 7. Construction of Maternal and Child Health Complex, Lekki 8. Construction of Maternal and Child Health Complex, Alimosho 9. Construction and equipping of cancer/radio diagnostic centre at Gbagada General Hospital 10. Relocation/Expansion of Drug Manufacturing Unit (DMU) 11. Rehabilitation of the School of Nursing 12. Completion/Equipping of Drug Quality Control Laboratory (DQCL), Ikeja 13. Rehabilitation and Equipping the Pharmaceutical Inspectorate Unit
49
10. BOOK BUILD PROCESS
The principal parties involved in the Book Building Process are:
1. Lagos State Government; 2. The Lead Book Runner - Chapel Hill; 3. The Co-Book Runners - Afrinvest, Radix, FBN Capital, FCMB Capital, Skye Financial Services, Stanbic IBTC and Zenith Capital; 4. The Stockbrokers to the transaction; and 5. The Receiving Banks
The Bonds that are to be issued by Lagos State are being offered through the Book Building process in accordance with the Securities & Exchange Commission (“SEC”) guidelines. The guidelines stipulate that a Book Build for a Bond Issuance must offer 100% of the securities to Qualified Institutional and High Networth Investors.
During the fixed period of time for which the book is open the book runner receives bids from investors at various rates, between the floor (minimum) coupon rate and the cap (maximum) coupon rate. Bids can be revised by the bidder before the book closes. The final coupon rate is not determined until the end of the process when the book is closed. After the close of the Book Building period, the book runner evaluates the bids received on the basis of pre-determined evaluation criteria and sets the final coupon rate. If demand is high enough, the book can be oversubscribed.
Bids cannot be withdrawn after the Bid/Issue Closing Date. In addition, all qualified investors are required to pay the Bid Amount upon acceptance of the Bid, following the Bid Period.
Lagos State will comply with the all SEC Guidelines for the Book Build. In this regard, the State has appointed Chapel Hill as Lead Runner to co-ordinate and manage the process. The State reserves the right to revise the Coupon rate Band during the Bid/ Issue Period.
The Coupon Price of [xx%] has been determined in consultation with the Issuer on the basis of the yield curve, similar securities issued by other state governments and an assessment of market demand for the Bonds as determined through the Book Building Process. The par value of the Bonds is N1,000.00 (One Thousand Naira).
Lagos State in consultation with the Lead Book Runner reserves the right not to proceed with the Issue at anytime after the Bid/Issue Opening Date but before Allotment, without assigning any reason therefore.
50 11. OTHER GENERAL INFORMATION
11.1 STATEMENT OF INDEBTEDNESS
Save as disclosed herein, the State had no outstanding debentures, mortgages, loan capital, overdrafts, short term loans, charges or similar indebtedness or material contingent liabilities other than those arising from the ordinary course of activities. However, the State as at December 31, 2008 had liabilities in the ordinary course of activities amounting to N 66.306 billion.
11.2 CLAIMS, LITIGATIONS AND DISPUTES
The Lagos State Government in its ordinary course of business is involved in 83 civil and criminal cases pending in the Court of first instance and in the Appellate Courts. The claims against Lagos State have an estimated monetary value of N11,871,847,847.97.
The State also has an exposure of N1.5 billion representing guarantees given in respect of loans obtained for various material contracts and commercial projects. According to the Attorney General of Lagos State, the State has good defence to these pending legal actions and none of the claims is likely to have any material or adverse effect on the State.
11.3 MATERIAL CONTRACTS
The Agreements that are specifically material to this transaction are:
. A Vending Agreement dated April 19, 2010 between the Lagos State Government on the one part and Chapel Hill, Afrinvest, Radix, FBN Capital, FCMB Capital Markets, Skye Financial Services, Stanbic IBTC and Zenith Capital on the other part by which the latter had agreed to Offer for Subscription (by way of a Book Build) the N[.] Lagos State Fixed Rate Bond [Series 2] 2010/2017 on behalf of the State. . A Supplemental Trust Deed dated April 19, 2010 between the Lagos State Government on the one part and First Trustees Limited, Skye Trustees Limited, UBA Trustees Limited and Union Trustees Limited on the other part by which the latter have agreed to act as Trustees to the sinking fund to be established in connection with the N57,500,000,000.00 Billion Lagos State Fixed Rate Bond [Series 2] 2010/2017.
11.4 COSTS AND EXPENSES
The costs, charges and other expenses and incidentals to this Offer including fees payable to the regulatory authorities, professional parties, brokerage commission, printing, distribution, publicity and advertising expenses are estimated at N1,711,587,500.00 representing approximately 2.98s% of the proceeds and are payable by the State.
51 11. OTHER GENERAL INFORMATION
11.5 REMITTANCE TO THE SINKING FUND The following tables indicate amounts to be transferred to the Sinking Fund for the purposes of servicing interest and principal payments. (The table represents the coupon of 10% per annum)
LASG BOND TRANCHE 2 (REMITTANCE TO SINKING FUND)
INTEREST (10% PER ANNUM) AND PRINCIPAL
MONTH REMITTANCE (N) MONTH REMITTANCE (N) 1 1,172,879,973.91 43 1,172,879,973.91 2 1,125,619,699.93 44 1,172,879,973.91 3 1,172,879,973.91 45 1,157,126,549.25 4 1,157,126,549.25 46 1,172,879,973.91 5 1,172,879,973.91 47 1,157,126,549.25 6 1,157,126,549.25 48 1,172,879,973.91 7 1,172,879,973.91 49 1,172,879,973.91 8 1,172,879,973.91 50 1,125,619,699.93 9 1,157,126,549.25 51 1,172,879,973.91 10 1,172,879,973.91 52 1,157,126,549.25 11 1,157,126,549.25 53 1,172,879,973.91 12 1,172,879,973.91 54 1,157,126,549.25 13 1,172,879,973.91 55 1,172,879,973.91 14 1,125,619,699.93 56 1,172,879,973.91 15 1,172,879,973.91 57 1,157,126,549.25 16 1,157,126,549.25 58 1,172,879,973.91 17 1,172,879,973.91 59 1,157,126,549.25 18 1,157,126,549.25 60 1,172,879,973.91 19 1,172,879,973.91 61 1,172,879,973.91 20 1,172,879,973.91 62 1,125,619,699.93 21 1,157,126,549.25 63 1,172,879,973.91 22 1,172,879,973.91 64 1,157,126,549.25 23 1,157,126,549.25 65 1,172,879,973.91 24 1,172,879,973.91 66 1,157,126,549.25 25 1,172,879,973.91 67 1,172,879,973.91 26 1,141,373,124.59 68 1,172,879,973.91 27 1,172,879,973.91 69 1,157,126,549.25 28 1,157,126,549.25 70 1,172,879,973.91 29 1,172,879,973.91 71 1,157,126,549.25 30 1,157,126,549.25 72 1,172,879,973.91 31 1,172,879,973.91 73 1,172,879,973.91 32 1,172,879,973.91 74 1,141,373,124.59 33 1,157,126,549.25 75 1,172,879,973.91 34 1,172,879,973.91 76 1,157,126,549.25 35 1,157,126,549.25 77 1,172,879,973.91 36 1,172,879,973.91 78 1,157,126,549.25 37 1,172,879,973.91 79 1,172,879,973.91 38 1,125,619,699.93 80 1,172,879,973.91 39 1,172,879,973.91 81 1,157,126,549.25 40 1,157,126,549.25 82 1,172,879,973.91 41 1,172,879,973.91 83 1,157,126,549.25 42 1,157,126,549.25 84 1,172,879,973.91 48,867,123,287.67 48,914,383,561.64
52 11. OTHER GENERAL INFORMATION
11.6 CONSENTS
The under listed have given and not withdrawn their written consents to the issue of this Supplementary Prospectus with their names and reports included in the form and context in which they appear:
Representatives of the State Executive Council His Excellency, Mr. Babatunde Raji Fashola, SAN
Her Excellency, Princess (Mrs.) Sara Adebisi Sosan
Princess Adenrele Adeniran-Ogunsanya
Mr. Rotimi Oyekan
Mr. Ben Akabueze
Honourable Commissioner for Justice & Attorney- Barrister Olasupo Shasore, SAN General Mr. Adeniyi Oyemade
Dr. Muiz Banire
Mr. Jide Sanwo-olu
Dr. Jide Idris
Mr. Tunde Balogun
Dr. Dele Onabokun
Mr. Opeyemi Bamidele
Mr. Rotimi Agunsoye
Mr. Bolaji Abosede
Prince Olanrewaju Waidi Balogun
Dr. Kadri Obafemi Hamzat
Dr. Tola Kasali
Senator Tokunbo Afikuyomi
Professor Bamidele Badejo
Prince Adesegun Oniru
Mrs. Joke Orelope-Adefulire
Prince Demola Adeniji-Adele
Chief Enock Kolapomoye Ajiboso
53 11. OTHER GENERAL INFORMATION
Auditor-General to the State Mr Olusola Olowo Arowa
Accountant-General to the State Mr Akin D. Ambode
Lead Financial Adviser / Issuing House Chapel Hill Advisory Partners Limited
Joint Financial Advisers / Issuing Houses Afrinvest (West Africa) Limited
Radix Capital Partners Limited
FBN Capital Limited
FCMB Capital Markets Limited
Skye Financial Services Limited
Stanbic IBTC Bank PLC
Zenith Capital Limited
Lead Stockbroker Marina Securities Limited
Joint Stockbrokers Chapel Hill Denham Securities Limited
Afrinvest (West Africa) Limited
Camry Securities Limited
Clearview Investment Company Limited
CSL Stockbrokers Limited
Dominion Trust Limited
FBC Trust & Securities Limited
FBN Securities Limited
F & C Securities Limited
FIS Securities Limited
Greenwich Trust Limited
Profund Securities Limited
PSL Limited
Pyramid Securities Limited
Reward Investments Limited
Security Swaps Limited
Signet Investment & Securities Limited
Stanbic IBTC Asset Management Limited
Zenith Securities Limited
54 11. OTHER GENERAL INFORMATION
Joint Solicitors to the Offer Banwo & Ighodalo
Simmons Cooper Partners
Sofunde Osakwe Ogundipe & Belgore
Receiving Banks Access Bank Plc
Afribank Nigeria Plc
Bank PHB Plc
Ecobank Nigeria Plc
Fidelity Bank Plc
First Bank of Nigeria Plc
First City Monument Bank Plc
Guaranty Trust Bank Plc
Intercontinental Bank Plc
Oceanic Bank International Plc
Skye Bank Plc
Stanbic IBTC Bank Plc
Sterling Bank Plc
Union Bank Plc
UBA Plc
Zenith Bank Plc
Joint Trustees to the State First Trustees Limited
UBA Trustees Limited
Skye Trustees Limited
Union Trustees Limited
Reporting Accountants KPMG Professional Services
Registrars to the State First Registrars Limited
Rating Agencies Agusto & Co
55 11. OTHER GENERAL INFORMATION
11.7 DOCUMENTS AVAILABLE FOR INSPECTION
The following documents will be available for inspection throughout the life of the Bond at the principal offices of the Lead and Joint Financial Advisers/Issuing Houses and from the Lagos State Ministry of Finance, Alausa, Lagos:
. The Shelf Prospectus dated December 22, 2008 in respect of the N275,000,000,000 Lagos State Debt Issuance Programme; . The Supplementary Shelf Prospectus dated April 19, 2010 issued in respect of the N57,500,000,000 Lagos State Fixed Bond [Series 2] 2010/2017; . Lagos State’s published annual public accounts (including its annual Statement of revenue and expenditure) for the period ended December 31, 2008; . Lagos State’s Annual Budget for the 2009/2010 financial year, as presented to the Lagos State House Assembly of Lagos State; . Letter from the Joint Solicitors to the Offer on the outstanding claims, litigations and material contracts involving the State; . The Vending Agreement; . The Trust Deed; and . The Lagos State Government Gazette containing the Lagos State Bonds and Securities Issuance Law 2008 and the Lagos State Debt Office Law 2008.
11.8 RELATIONSHIPS BETWEEN THE STATE AND ADVISERS
Skye Financial Services Limited is a subsidiary of Skye Bank Plc in which the State has significant interest.
11.9 EXTRACT FROM TRUST DEED
The Supplementary Trust Deed contains, inter alia, the following provisions
2.1 AMOUNT, TENOR AND STATUS
2.1.1 Series Amount: The Aggregate Principal Amount of Bonds for this Series is N57,500,000,000 comprising 57,500,000 registered Bonds at a par value of N1,000 each.
21.2 Type of Bonds: Fixed Rate Bonds.
2.1.3 Status of Bonds: The Bonds constitute senior and direct obligations of the State. The Bonds are not guaranteed by the Federal Government of Nigeria. The Series 2 Bonds qualify as securities in which trustees and pension fund administrators may invest under the Trustees Investment Act Cap T22 LFN 2004 and the Pension Reform Act Cap P4 LFN 2004 respectively. The State has not issued an Irrevocable Standing Payment Order in respect of the Series 2 Bonds.
2.1.4 Minimum Subscription: The minimum subscription amount for the Bonds is N10,000,000 and multiples of N5,000,000 thereafter.
2.1.5 Tenor: The period from the Issue Date to the Maturity Date.
2.1.6 Tax Considerations: The Series 2 Bonds shall be exempt from all forms of taxation in the Federal Republic of Nigeria. Accordingly, all payments made to Holders shall be free and clear of withholding, or any deductions at source or otherwise and/or State and Federal income and capital gains or other taxes.
2.1.7 Eligible Investors: Subscription to the Bond is restricted to Qualified Institutional Investors and High Networth Individuals
56 11. OTHER GENERAL INFORMATION
5. REPRESENTATIONS AND UNDERTAKINGS
5.1 Representations and Warranties of the Issuer
5.1.1 The Issuer hereby certifies that neither the execution of the Programme Trust Deed or this Deed nor the creation of the charge hereunder contravenes the provisions of any laws of the State.
5.1.2 The Issuer also warrants that no amalgamation, reconstruction or other change in the status of the State shall be interpreted to avoid the obligations herein imposed on the Government, and in the event of any change in the status of the State, the successor(s)-in-title of the State government shall be held and deemed responsible for the performance of the obligations imposed hereunder.
5.2 Undertakings
5.2.1 The Issuer irrevocably undertakes to the Holders that it shall ensure the deduction of funds from the CDSA, at least five (5) Business Days prior to the end of every month during each year in which the Series 2 Bonds remain outstanding and ensure that same is deposited into Series 2 Sinking Fund towards the accumulation of monies for principal repayment at Maturity and payment of Coupon on the relevant Coupon Payment Dates.
57
12. MATERIAL ADVERSE CHANGE STATEMENT
12.1 DECLARATION
This Supplementary Shelf Prospectus has been prepared on behalf of the Lagos State Government by the Issuing Houses for purposes of providing information to prospective investors on relevant aspect of the State, the Series 2 Bond Issue and the investment therein.
Except as disclosed in this Supplementary Shelf Prospectus, there has been no material adverse change in the financial position or prospects of the Issuer and no significant change in the financial condition or prospects of the Issuer.
In addition, during the twelve calendar months immediately preceding the date of filing an application with the Securities & Exchange Commission for the registration of this Supplementary Shelf Prospectus, Lagos State did not breach any terms and conditions in respect of borrowed monies which resulted in the occurrence of an event of default and an immediate recall of such borrowed monies.
The Issuer accepts responsibility for the information contained in this Supplementary Shelf Prospectus which, when read together with the Prospectus referred to above, contains all information that is material in the context of the issue of the Bonds.
SIGNED for and on behalf of the Issuer, Lagos State Government
By:
______Honourable Commissioner for Finance Honourable Attorney-General
58
13. PROCEDURE FOR APPLICATION AND ALLOCATION/ALLOTMENT
13.1 APPLICATION
1. Qualified Investors are hereby invited to apply for Units of the Bond through the Book Runners.
Lead Book Runner: Chapel Hill Advisory Partners Co-Book Runners: Afrinvest , Radix, FBN Capital , FCMB Capital Markets, Skye Financial Services, Stanbic IBTC and Zenith Capital
The investors that are permitted to participate in this Book Building are High Networth Individuals (that is, individuals with a minimum net worth of N300 million) and Qualified Institutionals which includes Fund Managers, Pension Fund Administrators, Insurance Companies, Unit Trusts, Multilateral and Bi-Lateral Institutions, Registered and/or Verifiable Hedge Funds, Market Makers, Staff Schemes, Trustees/Custodians and Stockbroking firms as stipulated by Rule 78(C)(2) of the Rules and Regulation of the Securities and Exchange Commission.
2. Applications/Orders for the Bonds being offered must be made in accordance with the instructions set out in the Commitment Form. Investors must carefully follow all instructions as applications which do not comply with the instructions may be rejected.
3. The Book Build period for the Bonds now being offered will open on April 7, 2010 and close on April 13, 2010. Applications/Orders must be for a minimum of 10,000 Units and in multiples of 5,000 thereafter. The Participation Amount(s) and the Bid Coupon Rate must be entered on the Commitment Form.
4. The completion of a Commitment Form is a confirmation by each Participant that the Order is irrevocable and creates a binding obligation on the Participant which, to the fullest extent of the law, shall not be capable of recession or termination by any Participant.
5. Participants may order Bonds at any coupon rate within the Coupon Band subject to the Minimum Participation Amount and the terms and conditions stated on the Commitment Form.
6. A corporate applicant should affix its seal in the box and state its Incorporation (RC) Number or in the case of a corporate foreign subscriber its appropriate identification number in the jurisdiction in which it was constituted.
7. Upon the completion and submission of the Bid/Commitment Form, the Bidder/Participant is deemed to have authorised the Issuer and the Issuing Houses/Book Runners to effect the necessary changes in the Red Herring Prospectus as would be required for the purposes of filing the Final Prospectus with the SEC, without prior or subsequent notice of such changes to the Bidder. The Bid/Commitment Form shall be considered as the Application Form for the purposes of registration of the Final Prospectus with the SEC.
8. Bidders/Participants Applicants shall not be entitled to withdraw/modify Bids after the Bid/Issue Closing Date.
9. Bidders/Participants have the option to make a maximum of 3 (three) Orders on a Commitment Form. Such options shall not be considered multiple applications.
10. The Commitment Form presents the Bidder/Participant with the opportunity of indicating 3 (three) Bid Coupon Rates within the Coupon Band and Participation Amounts for each option. The Bid Coupon Rates and the Participation Amounts submitted by the Bidder/Participant in the Commitment Form will be regarded and treated as optional demands from the Bidder/Participant and will not be culminated.
11. Bidders/Participants must not submit another Commitment Form after the submission of a Commitment Form to a Book Runner or Stockbroker. The submission of a second or other Commitment Form(s) to either the same Book Runner/Stockbroker will be treated as multiple Bids/Orders. Multiple or suspected multiple Bids/Applications will be rejected.
12. Following the determination of the Coupon Rate, the maximum Participation Amount specified by a Participant at or below the Clearing Price will be considered for allocations of Bonds and all other order(s), irrespective of the corresponding Bid Coupon Rate(s), will automatically become invalid.
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13. The Issuer in consultation with the Book Runners reserves the right not to proceed with the Issue at anytime including after the Bid/Issue Opening Date but before the Allotment Date without assigning any reason thereof.
13.2 PAYMENT INSTRUCTIONS
1. Successful Participants must ensure that payment of the Participation Amount is received by [.] (Pricing Date + 2) via the CBN Inter-bank Funds Transfer System (CIBFTS), Nigerian Inter-bank System Electronic Transfer (NEFT) or Real Time Gross Settlement System (RTGS) in the following designated Issue Proceeds Account domiciled with the receiving banks:
BANK ACCOUNT NAME ACCOUNT NUMBER SORT CODE
Access Bank Plc LASG Bond Programme Collection 0140160004034 044150149
Afribank Nigeria Plc LASG Bond Offer Proceeds 0032866339658 14150030 Ecobank Nigeria Plc LASG Bond Sale Proceed - Collections 9997150221529101 050
Fidelity Bank Plc LASG Bond Offer Account NGN 000 2313 0001 70150003 First Bank of Nigeria Plc Lagos State Bond Issue Tranche 2 (Adebola House, Opebi Branch) (Issue Proceeds Account) 4622040000189 011154628
First City Monument Bank Plc Lagos State Bond Offer Collection 0011080507452003 214150018 Guaranty Trust Bank Plc LASG Bond Issue (Series 2) 205/10/1/4009/12 058-152052
Intercontinental Bank Plc LASG Bond Offer Account 0004100000000473 69150043 Oceanic Bank International Plc Lagos State Fixed Rate Bond - Series 2 11101030803 056150014
Skye Bank Plc Lagos State Government Bond II Offer Proceeds 171-1790000609 076-151718 Stanbic IBTC Bank Plc LASG Bond Issue (Series 2) 7200159500 221
Sterling Bank Plc LASG - Bond Offer Proceed A/C 900/221566/1/6/0 232
Union Bank Plc Lagos state Bond Account 4251040012302 032
UBA Plc Lagos State Bond Tranche 2 04510300000070 033153979
Zenith Bank Plc Lagos State Bond Public Offer (Series 2) 6010194147 057150013
13.3 ALLOCATION/ALLOTMENT
1. On the Pricing Date, the Issuing Houses/Book Runners will analyze the demand at respective coupon levels and, in consultation with the Issuer, finalize the Coupon Rate and the allocations to each Participant. Allocation Confirmation Notices will be sent to successful Participants.
2. The Issuer and the Issuing Houses/Book Runners reserve the right to accept or reject any Bid/Application in whole or in part for having not complied with the terms and conditions of the Issue.
3. Allotment of the Bonds will be effected only upon clearance of the Final Prospectus by the Commission. Allotment will be effected in the following manner -
(a) Allotment of Bonds in Certificate Form
Bond Certificates in respect of allotted Bonds will be dispatched by registered post to the addresses specified on the Bid/Application Form, to the Bidders/Applicants who have elected to receive the Bonds in physical form; not later than 15 (fifteen) Business Days from the Allotment Date.
(b) Allotment of Bonds Electronically (E-Allotment)
Bidders/Applicants who elect to receive the Bonds electronically must specify the Bidder/Applicant’s CSCS Account Number, the Primary Dealer or Stockbroking Firm and the CHN in the spaces provided on the Bid/Application Form.
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Please note that Bidders/Applicants must ensure that the name specified in the Bid/Application Form is exactly the same as the name in which the CSCS Account is held. In case the Bid/Application Form is submitted in joint names, it should be ensured that the Beneficiary CSCS Account is also held in the same joint names and are in the same sequence in which they appear in the Bid/Application Form. P
13.4 DETAILS OF BANK ACCOUNTS
1. Bidders/Applicants are required to indicate their bank account details in the space provided on the Bid/Commitment Form for the purposes of refund of return/excess monies plus accrued interest, Coupon and Principal re-payments (as the case may be).
2. Participants are advised to ensure that the bank account details provided on the Bid/Commitment Form are accurate. These bank account details shall be used by the Registrar for the payments stated in 13.4.1 above in connection with the Bonds.
3. Failure to provide correct bank account details could result in delays in the credit of the payments stated in 13.4.1 or the issuance of cheques/warrants which shall be sent to the addresses specified by the affected Participant by registered post. The Issuer, Issuing Houses, Receiving Banks, Trustees and Registrar shall not have any responsibility, nor will any of these stated parties undertake any liability for the same.
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COMMITMENT FORM
FOR ELIGIBLE INVESTORS ONLY BOOK BUILD PERIOD OPENS CLOSES LAGOS STATE GOVERNMENT OF NIGERIA 07/04/ 2010 13/04/ 2010
N57,500,000,000 LAGOS STATE 10% FIXED RATE BOND SERIES 2 (2010/2017)
Under the Lagos State N275,000,000,000 Debt Issuance Programme
Joint Financial Advisers /Issuing Houses
RC 261272
RC 125097 RC 639491 RC446599 RC 446561 RC 672560 RC 622258 RC 733583
OFFERING BY WAY OF BOOK BUILD
Orders must be made in accordance with the instructions set out in this Red Herring Prospectus. Investors must carefully follow all instructions as applications which do not comply
with the instruction may be rejected. If in any doubt, consult your Stockbroker, Accountant, Banker, Solicitor or any professional adviser for guidance
All Sections of this Form must be completed (as applicable) PLEASE USE BLOCK LETTERS QUALIFIED INVESTOR (PLEASE TICK ) DATE (DD/MM/YYYY) CONTROL NO. (FOR REGISTRARS’ USE ONLY) High Net worth Investors / / 2 0 1 0 Fund Managers Pension Fund Administrators DECLARATION I/We hereby confirm that I am/we are eligible I/We authorise the Issuer to amend the Red Insurance Companies persons to participate in this Bond Issue in accordance Herring Prospectus as may be required for Investment/Unit Trusts with applicable SEC Rules and Regulations. purposes of filing a Final Supplementary Shelf Prospectus with the SEC without recourse to I/We confirm that I/we have read the Prospectus me/us and I/We use this Form of Multilateral/Bilateral Inst. dated April 19, 2010 and that my/our Order(s) is/are Commitment as the Application Form for the made on the terms set out therein. Market Makers purpose of this Bond Issue. I/we hereby irrevocably undertake and confirm I/We note that the Issuer and the Issuing Staff Schemes my/our Order(s) for the Bonds equivalent to my/our Houses/Book Runners are entitled in their Trustees/Custodians Participation Amount(s) set out below at the Coupon absolute discretion to accept or reject this Rate to be discovered through the Book Building Order. Stockbroking Firms Process. Resident Corporate Investors I/We authorise you to enter my/our name on the I/We agree to accept the Participation Amount Register of Holders as holders of the Bonds that may as may be allocated to me/us subject to the Non-Resident Investors be allotted to me/us and to register my/our address terms of this Red Herring Prospectus. Hedge Funds as given below.
PARTICIPATION DETAILS (The Participation Amount(s) and the Bid Coupon Rate(s) being offered must be indicated out in the boxes below).
Participants have the option to make a maximum of three orders on the Commitment Form. Each option shall be regarded as a separate application and will be not be considered as multiple applications. All orders must be for a minimum amount of N10 million (Ten Million Naira) and in multiples of N5 million (Five Million) thereafter.
ORDER 1 PARTICIPATION AMOUNT (MINIMUM AMOUNT OF N10 MILLION AND IN MULTIPLES OF N5 MILLION THEREAFTER) BID COUPON RATE IN FIGURES N
IN WORDS
ORDER 2 PARTICIPATION AMOUNT (MINIMUM AMOUNT OF N10 MILLION AND IN MULTIPLES OF N5 MILLION THEREAFTER) BID COUPON RATE IN FIGURES N
IN WORDS
ORDER 3 PARTICIPATION AMOUNT (MINIMUM AMOUNT OF N10 MILLION AND IN MULTIPLES OF N5 MILLION THEREAFTER) BID COUPON RATE IN FIGURES N
IN WORDS
FIRST REGISTRARS NIGERIA LIMITED PLEASE TURN OVER TO COMPLETE THIS FORM
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COMMITMENT FORM (REVERSE SIDE)
INVESTOR DETAILS (INDIVIDUAL/CORPORATE/JOINT) (Please use one box for one alphabet leaving one box blank between first word and second)
SURNAME/CORPORATE NAME
FIRST NAME (FOR INDIVIDUALS ONLY) OTHER NAMES (FOR INDIVIDUALS ONLY)
JOINT APPLICANT’S FIRST NAME (IF APPLICABLE) OTHER NAMES (FOR JOINT APPLICANT ONLY)
CONTACT PERSON (FOR CORPORATE APPLICANT)/ NEXT OF KIN (FOR INDIVIDUAL APPLICANT)
ADDRESS IN FULL (PLEASE DO NOT REPEAT APPLICANT(S)’ NAME). POST BOX NO. ALONE IS NOT SUFFICIENT
TEL.
CITY STATE E-MAIL
ALLOTMENT PREFERENCE
Please tick to indicate an allotment preference – CERTIFICATE / ELECTRONIC (BOOK ENTRY)
E-ALLOTMENT DETAILS (FOR BOOK-ENTRY ALLOTMENTS ONLY)
Please credit my/our CSCS Account as detailed below to the extent of the Bonds allotted:
PARTICIPANT’S CHN (CLEARING CSCS ACCOUNT NO: HOUSE NUMBER):
NAME OF STOCKBROKING FIRM:
BANK DETAILS (FOR E-PAYMENTS) BANK NAME BRANCH
ACCOUNT NO: CITY/STATE
SIGNATURES
SIGNATURE 2ND SIGNATURE (CORPORATE/JOINT) SEAL & RC. NO.
NAME OF AUTHORISED SIGNATORY (Corporates only): NAME OF AUTHORISED SIGNATORY (Corporates/Joint):
DESIGNATION (Corporate only): DESIGNATION (Corporate only):
STAMP OF BOOK RUNNER/SELLING AGENT
(BOOK RUNNERS/ISSUING HOUSES/STOCKBROKERS TO THE ISSUE/ PLACEMENT AGENTS ONLY)
STAMP OF RECEIVING AGENT
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