Lagos Denies Terminating Controversial Concession Deal On Lekki-Epe Highway

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.