By AYOOLA OLAOLUWA
The controversy over the real owners of the Lekki Concession Company Ltd (LCC), a privately owned company, has continued to linger, with claims and counter claims over the ownership of the firm by many Nigerians.
The latest crisis was sparked off by the August 9, 2021 decision of the Lagos State House of Assembly (LSHA) to approve Governor Babajide Sanwo-Olu’s request for the state to take over the debt portfolio of the LCC.
The assembly, it was learnt, had received the request from the executive on June 21, and went ahead to approve the governor’s request after the report of the Committee on Finance was presented to the whole house on August 9.
In his presentation, the Chairman, Committee on Finance, Mr. Rotimi Olowo, had said Lagos State would become the subsisting shareholder of LCC with 75 per cent shareholding and the Office of Public Private Partnerships shareholding of 25 per cent.
He further added that this was a fall-out of the buy-out of all the shareholding interests of the company by the state government.
“The agreement was to convert the loan to a public sector facility with the benefit of a considerable reduction in interest charges of 1.02 per cent of $1.12 million biannual.
“This is against the 4.12 per cent of $2.746 million per bi-annual, therefore, giving a savings of $1.16 million bi-annual or $3.24milliom per annum.
“The House, therefore, granted the executive the approval to convert the AFDB loan to the public sector loan backed up by sovereign Federal Government guarantee on behalf of the state government.
“This also authorises 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 the state’s statutory allocation”, Olowo had stated.
With the new arrangement between the African Development Bank (AfDB), LCC and the Lagos State government, the original $53.9 million private sector facility has now been converted to a sovereign (public sector) loan. And the servicing of the loan obligations will now mature in August 2034.
The announcement by the house has however, generated a lot of dust, with reports claiming that the state government has taken over the company from the LCC allegedly owned by a former governor of the state and a chieftain of the All Progressives Congress (APC), Asiwaju Bola Ahmed Tinubu.
Other reports claimed the state government is the original owner of the company after it purchased it in 2014.
Troubled by the conflicting reports, the Lagos Assembly reacted by debunking the claims that it granted the state government the go-ahead to take over the Lekki Concession Company.
The assembly clarified that what was approved was the request by the state government to convert the AfDB facility from a private sector loan to a sovereign loan, which attracts a lower interest rate to enable the company make some savings.
The state government also debunked the claims that it just took over the company, insisting that the LCC became the property of the state in 2014 when it acquired the full shares/equity of the former owners.
However, BusinessHallmark findings can confirm that the state government actually bought over the company from the original owners about seven years ago when the initiative ran into a ditch and was becoming a burden to the state.
The Lagos State government had in 2006, signed a Public Private Partnership (PPP) agreement with MessrsLekki Concession Company Limited (made up of the state government as owner, the Asset and Resource Management Company as the key investor, and Hitech Construction Company (Hitech) as the engineering, procurement, and construction management partner) for the construction of the 49.4 kilometre road expansion on the Lekki–Epe Expressway which starts from Ozumba Mbadiwe in Victoria Island through Lekki and Ajah to Epe.
The project is designed as a Build-Operate-Transfer (BOT) model of infrastructure delivery, with a 30 year concession agreement, after which the LCC will transfer it to the Lagos State government.
Funding for the project was sourced from both local and international lenders. While the sum of N23.9 billion was sourced from local lenders stood (comprising Zenith Bank, United Bank of Africa and First City Monument Bank, $53.9 million was borrowed from AfDB.
As the owner of the road, the Lagos State government provides public guarantee, backed by an Irrevocable Standing Payment Order (ISPO) over its statutory revenue on all debt incurred to construct and managed it, while LCC will recoup its investments, service and repay the debts, as well as meet capital and operating costs through revenue from toll collection.
However, things didn’t work out according to plans. At the completion of the Phase 1 of the project in early 2010, the management of LCC had announced that it would commence the collection of tolls at the Admiralty Circle Plaza end of the road, while noting that it had made provision of alternative routes to motorists not favourably disposed to the payment of toll.
Despite the provisions, the commencement of tolling was vigorously resisted by residents of Eti-Osa, Epe and Ibeju-Lekki, who regularly organised protests to block the road and make it un-motorable.
Another attempt by the LCC to commence tolling on December 18, 2011 was also resisted by stakeholders who questioned the state government’s decision to single out the area for a PPP project and the length of time granted to the concessionaire to recoup their money.
The crisis escalated when rights activist, Mr. Ebun Adegboruwa (SAN), instituted series of legal actions against the LCC, the Lagos State government and other partners in lower and appellate courts.
Though the company later won the battle to introduce tolling on the road, latter efforts to increase fees paid by motorists due to inflation and the high cost of foreign exchange were resisted by aggrieved stakeholders who protested against it.
Faced with growing agitations and protests from residents, the state government stopped the LCC from effecting any hike. The unexpected stiff oppositions thereby frustrated the commencement of tolling and generation of revenue to pay back accumulating debts in unpaid loans and interests by the LCC.
However, owing to the Irrevocable Standing Payment Order (ISPO) the state signed over its statutory revenue on all debt incurred on the projects, a large chunk of revenue due to the state from the federation account were regularly deducted from source.
Boxed into a corner with the inability of the LCC to service the loans secured for the construction of the road, the state government in December 2014, acquired full ownership of the LCC and the Lekki-Epe Expressway toll gate through the N7.5billion approved for the acquisition in 2013.
However, the state government remained silent on the contract terms and agreement entered into by the state government and the LCC.
Announcing the takeover of the firm in a letter dated May 8, 2018 and obtained by BH, the Lagos State Ministry of Transport disclosed that the state acquired the LCC and toll gate through a share and purchase agreement.
“Please, be informed that the Lagos state government via a share and purchase agreement acquired Lekki Concession Company limited in December 2014. The Lekki Concession Company Limited was set up as a special purpose vehicle to execute the Eti-Osa/Lekki-Epe expressway toll road concession.
“The project which was initially designed as a public private partnership project was based on assumptions and economic indicators that are no longer consistent with market realities.
“In the circumstance and upon consultation with the erstwhile shareholders and all major shareholders including the state house of assembly, the project was restricted, hence the acquisition of same by the government.
“Further information can be obtained from the Lekki Concession Company if required”, the ministry had stated.
But rather than abate, the problem that reared its head before the government takeover persisted. Though, now belonging to the government, the government was unable to build more tolling booths on the road as planned.
The initial financial model had contemplated three toll plazas, which warranted the initial lending and repayment plan.
However, with the non-tolling of the Conservation Toll Plaza (around Chevron) and the complete cancellation of the third toll plaza (proposed to be sited around the Lagos Business School), the financial sustainability of the project suffered a serious setback.
The firm also found it difficult to effect fee hike at the existing tolling booth despite the fact that the cost of servicing the debts incurred to build the road and the interests on it have continued to soar.
According to a source in the state ministry of transport who did not want his identity revealed because he did not have the permission to speak, the total loan incurred by the LCC for the project from local and international lenders stood at N23.9 billion and $53.9 million as of December 31, 2011.
He also disclosed that out of the $53.9 million AfDB loan, $20.1 million with interest rate of $40 million has been paid so far, leaving outstanding loan balance of $27.5million. While N11.6 billion remained to be paid from the N24.9billion local debt.
The source, however, said that the disturbance and subsequent closure of the toll gate following the End SARS SARS protests which rocked the nation in 2020 resulted in the inability of the LCC to repay loans incurred for the project from local and foreign lenders.
“The state (Lagos), being the new owner of the road and faced with dwindling revenues from the effects of Covid19 pandemic, approached its local and international lenders to plead for moratorium on outstanding loans”, he said.
The problem, according to the source, did not end there. He said the state was paying a standard (commercial) interest on the loan been a private sector facility.
“Apart from the challenge of not generating enough funds to service the loans, interest on the loans was also ballooning and becoming burdensome.
“It was a team of financial consultants employed by the state government to advise it that advised the government to convert the loan to a sovereign loan to further reduce the burden of huge interest been paid every month.
“This must have necessitated the decision of the government to formally takeover the LCC from a private entity”, he said.
BusinessHallmark reliably gathered that the state had approached the lenders requesting the conversion of the facilities to sovereign but were rebuffed.
The approval by the state House of Assembly, it was learnt, is one of the conditions given by the federal government and the lenders to convert the loans from private-sector equity to a sovereign one.
According to another source, the loans, the banks insisted, are still legally private sector loans, though now taken over by the state government. For it to be converted, it must be backed by law and approved by the state executive council”, the source stated.
With the approval given by the lawmakers, the loan is now eligible for conversion to a sovereign facility with an attendant significant lower interest rate of LIBOR plus 80 basis point and extended tenor.
The conversion will also lead to a crash of the applicable interest rate on the facility to circa 1.8%pa compared to the current interest rate of circa 4.12% p.a. Besides, the conversion will increase the tenor of the facility from the current five years to 15 years.
The new status was confirmed by the state Commissioner for Information, Gbenga Omotosho, who said the conversion will spread the cash flow impact by an additional 10 years.
“One of the requirements stipulated by the Federal Ministry of Finance for the loan conversion is the approval of the Lagos State House of Assembly.
“This is the approval given by the Lagos State House of Assembly on 5th August, and not an approval for taking over of LCC, as reported.
“As stated earlier, LASG took over the shares of the previous private shareholders of the company since December 2014”, the information commissioner explained.