Business News
Visionscape default leaves Lagos State on the hook
A likely default by Visionscape on a N27 billion bond may have left the Lagos State government on the hook since it put up a guarantee for the firm.
Hearing of the default by Lagos State on the VisionScape bond and I think this is a very good time to bring this thread up again!!
These are questions we must get answers to! Very few people in govt use the stuff between their ears@Ambrosia_Ijebu @ugodre @nonso2 @TunjiAndrews https://t.co/cvkKEE6Nmw
— Zeal Ak (@zeal_a) March 6, 2019
Boss it’s just our financial press acting like half baked financial literates. LASG guaranteed the bond they are not primary obligor. They come in now that the obligor has defaulted.
— Olufemi Adebayo (@blessed_04) March 6, 2019
While the reports suggest Lagos State defaulted on the bond, it merely provided a guarantee.
An issuer backed by a conditional subnational guarantee defaulting isn’t the same as the subnational itself defaulting. NB: this isn’t a defence of the underlying issue.
— Akin Oyebode (@AO1379) March 6, 2019
The chain of events
In March 2017, the state government signed a new environmental law christened the Cleaner Lagos Initiative.
Visionscape was handed residential waste disposal, a turf that was prior to this run by Private Sector Participants (PSPs).
The State Executive Council in March 2017 passed a resolution to secure the financing structure adopted by Visionscape and its partners to raise up to N50 billion in bonds for the implementation of the CLI through the issuance of an Irrevocable Standing Payment Order (ISPO) as a charge on the State Internally Generated Revenue Account/ Environmental Trust Fund.
The company thereafter raised an initial first tranche of its bond issuance, an N27 billion, 17.5% fixed rate, a five-year bond due 2022.
What may have led to the default
The company in October last year, shut down operations citing heightened political tension in the state and reported cases of attack on its employees, destruction of its operational vehicles and equipment.
John Irvine, MD of the firm in an interview held last year suggested payments where performance-based.
Now about funding, what we are doing is a performance-based contract or project. If I don’t perform I don’t get paid. For instance, if I had to collect a million tons of waste in January and I only collected 998 tons, of course, I would not get paid for that month because it is performance based.
It is unknown if the firm has received any payments since it suspended operations.
Implications of the default
Since Lagos State has guaranteed the bond, and the company has been unable to meet the required payments, the state government may have to make the required payments.
Some reports, however, suggest that the state government was yet to make payments into a sinking fund.
The wider picture
The reported default by the company, not only increases the risk premium of the state but companies that may wish to enter into similar agreements with state governments.
Business
FG explains why Lagos-Ibadan rail line was not linked to the sea
The government in its explanation said that the delay was due to disruption by trucks going in and out of the port complex.
The Federal Government has stated why the China Civil Engineering Construction Company (CCECC) Nigeria Limited could not link the final part of the Lagos-Ibadan rail line to the sea.
The government in its explanation said that it was due to disruption by trucks going in and out of the port complex.
According to a press statement signed by the Director, Press and Public Relations of the Federal Ministry of Transportation, Eric Ojiekwe, this disclosure was made by the Minister of Transportation, Rotimi Amaechi, while on a routine tour of the Lagos-Ibadan rail line project on Saturday, April 10, 2021.
The Minister pointed out that the original blueprint for the Lagos-Ibadan rail line project was not adhered to by CCECC Nigeria Limited and TEAM consortium and therefore warned that the master plan of the soon to commence Ibadan-Kano rail line project should not be changed.
The statement from the ministry partly reads, “The Nigerian Government has restated its commitment to connect the whole country by rail with the soon to commence Ibadan-Kano Standard Gauge Rail project.”
Amaechi forewarned that the master plan of the soon to commence project should not be changed as the original blueprint for the Lagos-Ibadan wasn’t adhered to by Messrs CCECC Nigeria and TEAM consortium. The Minister who rode the train from Ebute-Meta to the 8.72 km Apapa Port Spur line, informed the media that the inability of Messrs CCECC Nigeria to link the final part of the rail line down to the sea is rather due to disruption by trucks going in and out of the port complex.’’
The Minister had noted that the Federal Government has paid its share of the counterpart funding of the Ibadan-Kano rail line project and is waiting for China-Exim bank to ratify its side of the agreement for the project to commence.
He also advised the Nigerian Railway Corporation (NRC) to acquire more land around the train stations and the rail tracks for future development adding that this will be near impossible to do in the future as whatever space available now would have been taken over by businesses attracted to the rail line.
In case you missed it
It can be recalled that full commercial train services commenced on the Lagos-Ibadan rail line after train operations commenced on December 7, 2020, with only Lagos, Ibadan and Abeokuta residents enjoying the train services.
This is because other minor and major stations along that route were yet to be completed.
IBADAN-KANO RAIL PROJECT TO COMMENCE SOON – FG
The @NigerianGov has restated its commitment to connect the whole country by rail with the soon to commence Ibadan-Kano Standard Gauge Rail project.
The Minister of Transportation, @ChibuikeAmaechi, while on routine tour of the— Federal Ministry of Transportation (@MinTransportNG) April 11, 2021
Manufacturing
Industrial Index loses -12.39 points, as BUA and Lafarge Cement shares top losers list
The NSE Industrials index lost 12.39 index points in the first trading week in the month of April.
The Nigerian Stock Exchange Industrial Index at the close of trading activities for the first week in the month of April closed on a bearish note, following a 0.66% decrease in the shares of BUA CEMENT and Lafarge.
At the close of trading activities on the Nigerian Stock Exchange on the 9th of April 2021, the industrial index depreciated by 55.01 index points, to close lower at 1,928.18 index points for the week.
When compared to the overall performance of the market, the NSE Industrial index underperformed, noting that the NSE All-Share Index and Market Capitalization depreciated by 0.66% to close the week at 38,866.39 and N20.3350 trillion respectively.
READ: COVID-19, VAT, FX scarcity adversely impacted our operations in 2020 – Nigerian Breweries boss says
What you should know
The NSE Industrial Index was designed to provide an investable benchmark to capture the performance of the Industrial Sector. It comprises the most capitalized and liquid companies in the industrial sector and is based on the market capitalization methodology.
The index tracks the performance of ten industrial companies on the Nigerian Stock Exchange which includes Dangote, BUA, and Lafarge Cement.
The overall performance of the companies for the week was bearish, as the index closed on a negative note driven by the decrease in the share price of BUA Cement and Lafarge.
MEYER (19.51) was the only gainer for the week, while BUACEMENT (-1.09%) and LAFARGE WAPCO (-3.00%) were the only losers for the week.
GAINER
- MEYER up by19.51% to close at N0.49.
LOSER
- WAPCO down by -3.00% to close at N21.00.
- BUACEMENT down by -1.09% to close at N72.70.
