The Lagos State House of Assembly did not approve N85billion for Governor Babajide Sanwo-Olu for the proposed Local Government Election in the state, WESTERN POST investigations have revealed.
A fake piece of news alleging that such an amount had been approved by the House had been doing the rounds on WhatsApp and other platforms.
But WP learnt that was approved on Monday by the House was ‘Special Dispensation Bond’, it was learnt.
It was gathered that the House only approved the request of the governor on Special Dispensation Bond and Bond Bridge Loan which will allow him access bond market quickly at a cheaper rate for execution of infrastructural projects
Chairman, House Committee On Finance, Hon. Rotimi Olowo, had explained the rationale behind the approval of the request for the Special Dispensation Bond and the Bridge To Financing programme by Governor Sanwo-Olu.
Speaking with Lagos Assembly Correspondents on Monday after the plenary, Olowo said the request from the governor had two aspects, saying the first was request for an approval for Bond Brigde Loan, which would allow the state to access bond market as soon as possible.
He explained that as at February this year, the Federal Government went to bond market at coupon rate of 12%, saying that in June, it had increased to 13.5%.
The lawmaker said comparing the rate with the bond secured by the state government in 2016 and 2017; the least of all was 16.6%, adding that the highest was around 17.25%.
Olowo noted that the opportunity the market provided was enough for the state to access it now, adding that the state would be able to get the rate cheaper and that the current bond of the state would mature in 2024.
“When you look at our Consolidation Debt Service Account (CDSA), we have about N22billion and we are talking N101.2billion in the next 2 or 3 years.
“It will amount to a lot of pressure on our debt obligation. So what we thought that is necessary is that we should quickly access the bond market with the approval of the House so that we can get it at cheaper rate and it will be for 10 years with 2 years moratorium.
“What that means is that, in the next two years after securing the bond we will not pay any money. We will not pay the interest and the capital; it will be like tax holiday. It will relieve the state the burden of sourcing for money to pay the creditors.
“On the second aspect, if today we don’t access the commercial loan from one of the banks at a single digit of 9.25%, we will still be losing because what we will still access, we will pay the holders of the bond between now and the next one months. That means we have been able to save money worth an average of N1.5billion in form of sinking fund to be able to make up to 2023.
“So, if we don’t pay that in the next 3 years, what it means is that we have gotten a saving of about N75billion. It is obvious that there cannot be a better time for the state to go for the bond market which we called ‘ Special Dispensation Bond’ and the second is a loan from a commercial bank at the interest rate of 9.25 which is very cheap.
“That is the reason why the Assembly speedily supports the executive. We always want to support the executive when it comes to infrastructure,” Olowo said.