The Lagos State House of Assembly has granted the request of the State Governor, Mr Babajide Sanwo-Olu, for the state government to assume full ownership of the privately-owned Lekki Concession Company Limited (LCC).
This follows the Executive’s request received by the lawmakers on June 21 and the subsequent directive to the House Committee on Finance to further look into it and report its findings to the House.
Six weeks after the mandate was given, the House Committee on Finance led by Rotimi Olowo submitted its report to the lawmakers.
Giving his presentation on Monday, Olowo explained that upon the buy-out of all the shareholdings interest of LCC by the state, the government has become the subsisting shareholders of the company with 75% shareholding while the Office of Public-Private Partnerships was left with the remaining 25% shareholding.
According to him, the original $53.9 million loan obligation from a private sector facility – the African Development Bank (AFDB) had been resolved after series of engagements between the bank, LCC, and the state government.
This was to convert the loan to a public sector facility with the benefit of a considerable reduction in interest charges of 1.02% of $1.12 million bi-annual, as against the 4.12% of $2.746 million per bi-annual, thus giving a savings of $1.16 million bi-annual or $3.24 million per annum.
At the end of Olowo’s presentation, the House granted the executive the approval to convert the AFDB loan to the public sector loan, backed up by a sovereign Federal Government guarantee on behalf of the state government.
It also authorised 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 Lagos State Government statutory allocations.
According to the report, the servicing of the loan obligations will be a maturity till August 2034.
Contributing to a debate on the report, a member of the House, Gbolahan Yishawu, supported the recommendation which he described as a smart move.
He believes the interest rate will not affect what the state is spending on capital expenditure. Rather, it will reduce the interest risk and rate by moving the loan from the private to the public sector.
Another lawmaker, Abiodun Tobun, on his part, said saving 3.1% in interest rate difference would further reduce the burden on the state government and encourage the savings to be used to develop other sectors of the economy.
For his colleague, Femi Saheed, the restructuring of the loan is an indication of transparency in the state financing and gives add-on flexibility for the additional years granted for the repayment of the loan.
He deemed the request a standard financial procedure practised all over the world.
The Speaker of the House, Mudashiru Obasa, has directed the acting Clerk of the House, Olalekan Onafeko, to send a clean copy of the resolution of the lawmakers to the governor.
