We acquired LCC in 2014, only requested loan conversion, Lagos govt clarifies

The Lagos state government has debunked news of the recent takeover of Lekki Concession Company (LCC), saying it only requested approval for the company’s loan conversion.

Gbenga Omotoso, Lagos commissioner for information, stated this in a press release on Tuesday.

Two days ago, the News Agency of Nigeria (NAN) had reported that the state assembly approved the request of the state to assume full ownership of Lekki Concession Company (LCC) Ltd, a privately-owned company.

But Omotoso said the state assembly’s request was part of requirements stipulated by the Federal Ministry of Finance for the loan conversion.

“This is the approval given by the Lagos State House of Assembly on 5th August, and NOT an approval for taking over of LCC, as reported,” he said.

“As stated earlier, LASG took over the shares of the previous private shareholders of the company since December 2014.”

Explaining further, the commissioner said loan conversion will give room for a lower interest rate on the loan.

He said the initial plan for the loan was to have three toll plazas that were no longer feasible and caused the financial sustainability setback for the company.

“Following the Lagos State Government’s full ownership of LCC in December 2014, the loan became eligible for conversion to a Sovereign facility with an attendant significant lower interest rate of LIBOR plus 80 basis points and extended tenor,” he added.

“In the recent past, there have been discussions amongst LCC/LASG, AfDB and the relevant Federal Government Ministries and Agencies concerning the conversion of the loan to a Sovereign facility. Upon the completion of the conversion, there will be a significant reduction of applicable interest rate and extended tenor.

“The Sovereign loan conversion will also lead to a crash of the applicable interest rate on the facility to circa 1.8%pa compared to the current interest rate of circa 4.12% p.a. Besides, the conversion will increase the tenor of the facility from the current five years to 15 years. This has the impact of spreading the cash flow impact by an additional 10 years.”

WHAT DOES THIS MEAN?

Both Omotoso and Rotimi Olowo, chairman, finance committee, Lagos assembly, explained briefly.

Olowo said the original $53.9 million loan obligation from a private sector facility had been resolved after series of engagements between Africa Development Bank (AFDB), the company, and the state government.

“The agreement was to convert the loan to a public sector facility with the benefit of a considerable reduction in interest charges of 1.02 per cent of $1.12 million biannual,” NAN quoted him as saying.

“This is against the 4.12 per cent of $2.746 million per bi-annual, therefore, giving a savings of $1.16 million bi-annual or $3.24milliom per annum.

“The house, therefore, granted the executive the approval to convert the AFDB loan to the public sector loan backed up by sovereign Federal Government guarantee on behalf of the state government.

“This also authorises the state government to issue a counter-guarantee in favour of the Federal Government along with an Irrevocable Standing Payment Order (ISPO) to deduct from the state’s statutory allocation.”

For Omotoso, the Sovereign loan conversion will “lead to a crash of the applicable interest rate on the facility to circa 1.8% pa compared to the current interest rate of circa 4.12% p.a.”

He added that the conversion would increase the tenor of the facility from the current five years to 15 years.

“This has the impact of spreading the cash flow impact by an additional 10 years.”

LAGOS TO PAY $2.24m PER ANNUM FROM STATUTORY ALLOCATION

With the restructuring of the loan to a public sector facility, TheCable understands that the state government will have to pay about $2.24 million annually (almost a billion naira) to service the debt.

Also, the state government will continue to take fees at the Lekki toll gates.