Issuer: Lagos State Infrastructure Sukuk SPV
Size: N29.8 billion
Structure: Forward ijarah lease sukuk
Tenor: Seven years
Banks: Lotus Capital (lead bookrunner), Chapel Hill Denham, Capital Assets, CardinalStone, SCM Capital, Stanbic IBTC (joint bookrunners).
Date: May 2023
With a population of over 20 million, the size and population density of Lagos – Africa’s largest city and Nigeria’s economic powerhouse – creates complex and substantial infrastructure needs in almost every area from telecoms and renewable energy to water and sanitation.
While the Nigerian government can help finance some of the enormous investment needed, much of the funding needs to come from the private sector, making the domestic capital markets a key priority for the state of Lagos.
Executing on this, the Lagos state government chose to access the domestic bond and sukuk market last year, issuing a N115 billion ($90 million) 10-year bond and a N29.8 billion seven-year sukuk – Lagos’s first – to finance over 200 infrastructure projects across the state, many of which will be in the water, sanitation and hygiene sectors.
The importance of the deal is that it helps to mobilise institutional capital into funding much-needed infrastructure projects
Both deals, issued from the state’s N1 trillion debt and hybrid-issuance programme, were well received and marked several firsts, not least the issuance programme being country’s largest, and the sukuk being the state’s debut and the largest sukuk from an issuer other than the sovereign.
The banks priced the 10-year bond to pay 15.25%, while the seven-year sukuk was inside that at 14.675%.
Beyond the execution of the entire transaction, the importance of the deal is that it helps to mobilise institutional capital into funding much-needed infrastructure projects, and demonstrates to other municipalities in Nigeria – and across Africa – that this can be an option for them.
For this reason, together with Lagos pioneering a successful debut, the sukuk wins the award for Africa’s best Islamic project finance deal this year.
