Nigerian institutional investors back bonds issuance from country’s leading free zone

The Lagos Free Zone Co. (LFZC), a subsidiary Singaporean conglomerate Tolaram, has successfully issued a NGN 10.5bn 20-year Series 1 Senior Guaranteed Fixed Rate Corporate Infrastructure Bonds, the company said today. The issuance falls under a NGN 50bn debt issuance programme aimed at securing financing to expand what has become Nigeria’s most modern and integrated free zone, located on the outskirts of Lagos.

The Lagos Free Zone is being developed along with the Lekki Deep Sea Port and will be the largest integrated port-based economic zone in Nigeria. It is being developed over 830 ha as part of a $2.1bn investment commitment by Tolaram, of which about half has been invested already.

The company is expected to complete the deep sea port in 2022, at the same time when it would lay out a piped gas supply and distribution network to provide energy to its tenants. The port is currently under construction by the China Harbour Engineering Co. (CHEC) and will have its container terminal operated by CMA Terminals. Its Phase 1 development involves 2 container berths and one dry bulk terminal, with a capacity of 1.2 million TEUs and a draught of 16.5m.

The bonds issuance announced this week is significant for Nigeria where unlocking domestic institutional capital remains a priority to bridge the infrastructure financing gap. The bond was backed by an irrevocable and unconditional guarantee from InfraCredit and was accorded a ‘AAA’ long term credit rating by Agusto and Co. and GCR, reflecting the highest degree of creditworthiness for these bonds.

It was also oversubscribed by institutional investors including eleven domestic pensions funds, two insurance firms, banks and HNIs. “The transaction is the first 20-year non-FGN Bond issue in the Nigerian debt capital market and the first Securities and Exchange Commission approved Infrastructure Bond for the development of an industrial hub” LFZC said in a statement.

Source: PenCom

The latest data available from Nigeria’s National Pension Commission shows that the country’s pension funds have continued to shy away from investing in infrastructure funds. Despite a YoY growth of pension funds’ investments into infrastructure funds of +23% between July 2020 and July 2021, they still represent only 0.52% of Nigerian pension funds’ overall investment portfolio.

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