Lagos State Government, yesterday, said it terminated its concession agreement with Lekki Concession Company, LCC, the concessionaire handling the 49.63 kilometer Eti-Osa-Lekki-Epe Expressway, “to save motorists from paying exorbitant toll tariff on the ever busy road.”
This came as it announced that the last phase of N87.5 billion out of the N275 billion fixed rate bond would be out for prospective investors in the fourth quarter of the year, to finance the acquisition right and take control of the toll regime on the road.
The termination came seven years after the commencement of the 30-year agreement between the state government and LCC, for the upgrade, expansion and maintenance of the road estimated to gulp N50 billion.
It will be recalled that the state House of Assembly had, on Tuesday, at a special plenary session, approved N7.5 billion supplementary budget to accelerate the transfer of ownership of the road to the state, leaving the state with wider policy option with regards to that important road infrastructure.
Reason for govt’s action
Giving the reason for government’s action, Commissioner for Finance, Mr. Ayo Gbeleyi, said: “As provided for in the concession agreement between the parties, the concessionaire, (LCC) can increase the toll tariff based on the inflation rate in the country, among other things every quarter. The risk is that when an agreement was reached between two parties to negotiate on a contract, whatever the year, one cannot envisage the entire challenge that will arise later. The dynamics of the Lekki project did not envisage that there would be devaluation of the country’s currency, between 2008 and 2013 from N118 to N160. This impacted on their cost which they will attempt to pass to the common man on the street, because of the inflation adjustment.
“For instance, if the state government had not come up with this plan last July, the concessionaire would have increased the toll fee for cars from N120 to N144 while drivers of SUVs will have to part with N180 as against the N150 cost they are still enjoying. This is because the concessionaire would have added 20 percent. The government felt that this would be difficult to push to the residents at this time. And of course, at every anniversary, it was meant to go up by the inflation rate plus five percent. And we should not forget that this is the first Public Private Partnership, PPP, agreement reached by the state government.”
On N85.5bn bond
The commissioner said “Our application has been filed with Security Exchange Commission, SEC, and other aspects have been handled. Our best estimation is that by the early fourth quarter of this year, we will be able to access the cash from the transaction. Out of the bond issuance of N275 billion, the state government has issued three series of the bond totaling N187.5 billion.”
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