The Lagos State government under Governor Babajide Sanwo-Olu has provided a N79 billion credit guarantee to a little known Voda Infrastructure Management Limited, a development company appointed by the state to undertake construction of its two projects,
The projects include Massey Children Hospital and Opebi Link Bridge.
The guarantee is a total of NGN79 billion term loans and bond issuance obtained by Voda for the respective projects from commercial banks and bondholders.
The payment obligations (including coupon, principal repayment and other charges) on the loans and bond issue are backed by irrevocable standing payment orders issued by the state as a first-line monthly deduction from its expenditure accounts domiciled with the banks and IGR accounts respectively.
It is unclear why Lagos State did not issue the bonds directly and use the proceeds to fund the projects. Voda Infrastructure Management Limited led by CEO Akindeji Akinniranye, was registered some 4-years ago in September 2020, according to CAC data.
The Lagos State Government’s gross debt (including contingent liabilities) increased to N2.7 trillion in March 2024, due to adverse exchange rate movement as a high portion of the state’s debt, above 53% is foreign currency (FCY) denominated.
Leverage metrics have as such deteriorated and net debt to total income weakened to 1.8x in 2023 (2022: 1.6x), free cash flow (FCF) coverage of gross debt declined to 23% in 2023 from 36% in 2022, and net interest coverage reduced to 4.8x in 2023 from 6.4x in 2022, due to higher finance charge from the elevated debt.
Lagos state has an ongoing plan to refinance the foreign currency loans with local debt,
“We do not expect this to materialise in the near term as it will have negative consequences on the interest cover and the debt maturity profile,” GCR Ratings said in a note.
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