Lagos expands development financing with N244.822bn bond

The recently floated N244.822bn bond by the Lagos State Government is opening a new vista of opportunities for the sub-nationals to explore capital market and attract investors into their respective states, Daily Trust reports. Lagos State recently issued what has been termed as the single largest bond issuance by any state, totaling N244.82 billion which […]

The recently floated N244.822bn bond by the Lagos State Government is opening a new vista of opportunities for the sub-nationals to explore capital market and attract investors into their respective states, Daily Trust reports.

Lagos State recently issued what has been termed as the single largest bond issuance by any state, totaling N244.82 billion which would be channeled into critical infrastructure development.

The state government had issued Nigeria’s first subnational Green Bond, securing N14.815 billion with total bids reaching N29.29 billion to N27.79 billion.

The N14.815 billion 5-Year 16.00 per cent Fixed Rate Series 3 Green Bond 2030 marked another milestone in the state’s pioneering efforts at innovative financial management for long-term development.

The green bond was part of a combined issuance that also included the fourth tranche of conventional bond issuance, under the state’s N1 trillion Debt and Hybrid Instruments Issuance Programme (DAHI).

The Lagos State N230 billion 10-Year 16.25 per cent Series 4 Conventional Bond 2035 also set a new record, for the state and sub-national issuance.

While the state had started with an offer size of N200 billion, the instrument attracted N310.06 billion, of which N304 billion were within the advised range. It was the highest subscription to any state issuance in Nigeria, according to analysts.

Limited by regulations and excited by the enormous investors’ appetite, the state exercised the green shoe option and closed the fourth tranche at N230 billion.

With the success of the two latest issuances, Lagos is building further inclusiveness into its financing as well as the general state development. Lagos had earlier issued the largest and second subnational alternative bond, Sukuk, a Sharia-compliant global ethical instrument that aligns financing with Islamic principles of social good.

The N19.815 billion 14.675 per cent Series II Fixed Return Forward Ijarah Sukuk, a seven-year instrument issued by Lagos State Infrastructure Sukuk SPV Plc, the special purpose vehicle of the LASG, was also oversubscribed, exceeding its target within three days of opening.

According to the state government, the net proceeds of the Lagos Sukuk would go into the construction and rehabilitation of the Awoyaya section of the Eti-Osa-Lekki-Epe Expressway.

The net proceeds of the two latest issuances, concluded last week, totaling N244.82 billion, would be used to expand critical infrastructure in key sectors such as transportation, housing, environmental sustainability, healthcare, and education, all aimed at driving sustainable and inclusive growth in the state.

The funds would also be used to upgrade healthcare facilities, including the development of a new 280-bed hospital, install alternative solar power systems across schools and establish agro-processing hubs to strengthen food security.

“Lagos State has demonstrated to other subnational governments in Nigeria and around the world that they can access capital markets at scale, attract strong investor demand, and issue high-quality instruments.

“This sets an important precedent and offers a compelling roadmap for others to follow-one that creates real opportunities to mobilise capital for climate-resilient and sustainable growth”, said the Representative of the Deputy High Commissioner and Nigeria Finance & Investment Mobilisation Lead, British High Commission, UK Foreign Commonwealth Development Office, Temilola Akinrinade, at the combined signing ceremony for the two latest bond issuances by Lagos State.

At the signing ceremony the State Governor, Mr. Babajide Sanwo-Olu said the overwhelming response to the green bond was a strong endorsement of Lagos State’s vision for environmental responsibility, in alignment with the government’s THEMES+ Agenda.

“This is not just a financial transaction; it is a bold global statement. It reflects our confidence in the future of Lagos and reaffirms our shared commitment to sustainable development, responsible governance, and transformational growth,” Sanwo-Olu said.

He added: “This is now the largest bond issuance ever by Lagos State, and indeed by any subnational government in Nigeria. It is a resounding vote of confidence in the vision, governance, and fiscal discipline of Lagos State. This trust is precious, and we do not take it for granted”.

 

The governor reassured investors that the funds would be judiciously deployed.

 

He said, “To our investors: thank you for your confidence. Your investment is not merely financial, it is a lifeline for the aspirations and future of almost 25 million Lagosians.

 

“We remain firmly committed to accountability, transparency, efficiency, and prudent management of public resources. Every naira entrusted to us will translate into tangible improvements in the lives of our people. This is my solemn pledge as your Governor.

 

“Together, we are building a Lagos that is resilient, sustainable, inclusive, globally competitive, and full of shared prosperity,” Sanwo-Olu said.

 

The conclusion of the two bonds also coincided with the recognition of Sanwo-Olu as “TIME Africa Impact Personality of the Year” by the e TIME Africa Impact Summit, which was held in Johannesburg, South Africa. The award recognised the Sanwo-Olu’s administration’s inclusive growth initiatives and commitment to fostering economic prosperity.

 

Lagos State Commissioner for Finance, Mr. Abayomi Oluyomi said the maiden green bond issuance reflected the state’s unwavering commitment to climate-friendly development, infrastructure sustainability, and environmental resilience.

 

According to him, the rigorous project selection process undertaken for the green bond underscored the state’s dedication to financing initiatives that align with the United Nations Sustainable Development Goals (SDGs) and deliver measurable environmental impact.

 

He said that while regulatory thresholds limited the final size of the conventional bond issuance, the state now has a prospective higher target of N300 billion to N500 billion, given robust market participation.

 

“These successes reflect both the commitment of Lagos State to responsibly access and utilise the domestic capital market, and the sustained confidence investors continue to show in our economy.

 

“With a benchmark now approaching N300 billion and potentially reaching N500 billion in the future, we are optimistic that upcoming issuances will continue to attract robust market interest,” Oluyomi said.

 

Chief Executive Officer, Chapel Hill Denham, the lead issuer, Mr. Bolaji Balogun, stated that while many states in Nigeria face challenges in issuing bonds due to transparency and compliance issues, Lagos stands out as a beacon of best practices and innovation.

 

He said: “I strongly believe that the world is becoming increasingly African, and Lagos—this remarkable city-state—stands firmly at the center of that shift. Lagos can only continue to lead by leveraging the public markets in a substantial and strategic manner. Many years ago, Lagos set a record as the first state to issue in the public markets, and through successive administrations, that continuity of governance has remained one of the reasons the markets continue to support the state.

 

“This N230 billion issuance is not only the largest ever by a sub-national entity in Nigeria, but also the largest by any issuer in this market aside from the sovereign. To become the first sub-national in Africa to issue a green bond is no small feat”.

 

GCR Ratings (GCR), which had in July 2025 affirmed the state’s national scale long-term senior unsecured rating at AA-(NG), assigned an indicative long-term issue rating of AA-(NG)(IR) to the state bond issuance.

 

“The stable outlook reflects our opinion that Lagos State will continue to achieve sound operating performance that supports capital project implementation and allows for debt service costs to be adequately covered,” GCR stated on the outlook for the state economy.

 

Agusto & Co assigned an indicative “Aa” rating to the latest bond issuance, citing the state’s strong capacity to service its debt, the “state’s very good financial condition, supported by its sustainable cash-generating capacity, balanced expenditure profile and robust ability to meet local currency obligations from its internally generated revenue (IGR), which averages 70 per cent of its total revenue”.

 

Analysts at Agusto & Co similarly hailed the bond issuance describing it as “high quality debt issue with very low credit risk; very strong capacity to pay returns and principal on local currency debt in a timely manner.”