SAN FRANCISCO, August 28, (THEWILL) – The Lagos State Government Wednesday disputed news reports suggesting that it has cancelled the concession agreement it entered with the Lekki Concession Company Ltd, a special purpose vehicle representing investors, to design, build, operate and transfer the Eti Osa-Lekki highway for a 30-year period.
The controversial N50 billion naira agreement, which many stakeholders have described as fraudulently engineered to particularly line the pockets of the leader of the defunct Action Congress of Nigeria (ACN) and former governor of the state, Asiwaju Bola Tinubu, was signed in 2006 but became effective in 2008.
Stakeholders and the opposition in the state had particularly complained about the N50 billion naira price tag for the 50 kilometer road. The deal had priced 1 kilometer of the road for N1 billion naira.
Lagos State Commissioner for Budget and Economic Planning, Mr. Ben Akabueze, who led a team of the State Executive Council to the House of Assembly Tuesday to present a request for approval of supplementary budget told assemblymen that “the principal basis for the supplementation of 2013 budget was due to the decision to acquire the 100 per cent concession of the Eti-Osa-Lekki-Epe expressway and have it entirely under the control of the state government.”
Also commenting on the development, the Commissioner for Finance, Mr. Ayo Gbeleyi, explained that the state government will hand the concessionaire N15 billion naira to take the highway back from Tinubu and other investors.
He added that N6.8 billion will be expended on servicing existing debt obligations of LCC while N3.5 billion will be used to sort third party liabilities.
The commissioner also stated that N32 billion naira has so far been expended on the highway, with Lagos contributing N5 billion in 2008 when the deal took effect.
A statement emailed to THEWILL by the Lagos State Government on Wednesday explained the government’s decision to buy out LCC.
See statement below:
“LAGOS STATE GOVERNMENT BUYS BACK LCC’S CONCESSION RIGHTS IN ETI-OSA LEKKI-EPE EXPRESSWAY
The Lagos State Government wishes to state clearly that it has neither terminated nor cancelled the Concession Agreement it entered into with the Lekki Concession Company Limited (LCC) to reconstruct and expand the 49.36 km Eti-Osa Lekki-Epe Expressway.
To set the records straight, Lagos State Government is engaged in buying back the rights pertaining to the concession ahead of the 30-year period stipulated in the Design, Build, Operate and Transfer (DBOT) Concession Agreement. This is to be achieved by purchasing all the shares in LCC.
The State Government came to this decision to buy back the rights in the light of several developments clearly not envisaged in the 2006 Concession Agreement (which became effective in 2008) a few of which are highlighted below.
• The project, given its pioneering nature, had some underlying assumptions and market indicators under which the transaction was concluded which have since drastically changed in a manner that it can no longer be sustained in its current form. Such include the devaluation of the Naira and costs of construction.
• The LCC, which is the special purpose vehicle representing the investors, formally brought it to the attention of the State Government that given the rapid rise in interest rates on local loans, and other cost parameters, it is compelled to raise tolls currently being charged at Toll Plaza One from N120.00 to N144.00 per Car.
• The Concessionaire also brought it to the attention of the State Government, that as provided for under the agreement, tolling would have to commence at Toll Plaza Two.
• In addition, the Concessionaire indicated that unless it realised more income from increased rates at Toll Plaza One and commence tolling at the same rate per Car at Toll Plaza Two, it would not be able to meet its commitments to investors in the project and continue to fund completion of the remaining sections of the road.
• Furthermore, the LCC stated that Toll Plaza Three, as contained in the Agreement, must be built and tolls collected for the continued viability of the project.
Under such circumstances, the Lagos State Government felt obliged to buy out the interests of the Concessionaire in advance of the hand-over date of 2038 under a mutual settlement option also expressly provided for in the Concession Agreement. This is after due consultation with all major stakeholders including the Lagos State House of Assembly based on various feedback and agitation made to the Government.
Contrary to the misleading reports by some sections of the media on Wednesday, August 27, 2013 from the State House of Assembly’s consideration and approval of the 2013 Supplementary Budget, the buy-back is not and does not amount to a “termination” or “cancellation” of the concession of Eti-Osa, Lekki-Epe Expressway.
The significance of the buy-back, for which the State Government deserves commendation, is that it allows the Government to take full control over the determination of the toll rates in order to continue to make it affordable for road users. The LCC shall therefore continue to operate as a fully commercial entity for the benefit of taxpayers and the larger society.
More importantly, it would also preserve the ability of the Government to complete and deliver the infrastructure by direct budget funding, which was also one of the reasons for the presentation of the Year 2013 Budget Re-Ordering to the State House of Assembly.
In addition LASG wishes to reaffirm its unflinching commitment to the adoption of PPP Model as a complementary policy thrust for the acceleration of infrastructure delivery towards improving the living standards of the populace. Lagos remains an investor friendly State that shall continue to ensure the sanctity of contracts, as in this case, in sustaining investors’ confidence in its investment climate as a preferred destination.
The general public is therefore enjoined to continue to cooperate with LCC’s officials and operatives as it continues the expansion and construction works on the 49.36km Eti-Osa Lekki-Epe Expressway and the operations of the toll collection systems. LASG wishes you a safe and happy motoring experience on the modernised expressway with its associated free value added services such as 24/7 security patrol, vehicle break down recovery, ambulance services, amongst others.
Eko oni baje O!
Ayo Gbeleyi Ade Ipaye
Honourable Commissioner for Finance Honourable Attorney-General & Commissioner for Justice
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