Naira Depreciation responsible for delay in N25.3bn LCC Buyout Lagos Say


FasholaTVThe Lagos State Government has attributed the depreciation of naira against dollar to its proposed buyout plan of Lekki-Epe-Eti-Osa Expressway from its concessionaire, Lekki Concession Company (LCC), rather than giving consent to a toll increase of about 40 per cent.

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The state also explained challenges undermining the completion of the Ipaja-Ayobo road, which it ascribes to the position of the  Nigerian National Petroleum Corporation (NNPC) on four of its gas pipelines lain across the road close to an intersection opposite Jakande Estate, Baruwa.

Commissioner for Works and Infrastructure, Dr. Obafemi Hamzat, expressed concerns about the challenges at the end-of-the-year news conference he addressed alongside his Special Adviser, Mr. Ganiyu Johnson and the ministry’s Permanent Secretary, Mr. Bamgbose Martins, on Tuesday evening.

Under the 2014 appropriation bill now awaiting passage, the state government had proposed to buy back the LCC at a total cost of N25.3 billion, of which N15 billion was set aside for the buyout; N6.8 billion for the cost of servicing existing debt and N3.5 billion for third party liability.

Hamzat explained why the government opted to buy out the LCC, which he ascribed to the concessionaire’s proposal to increase toll on the route to a minimum of N170.

He said the government rejected the proposal in order to avoid putting an additional financial burden  on residents, despite the fact that the proposal seemed justifiable due to the scale of depreciation of the naira.

He added that the concessionaire considered the proposal to review toll upward because the value of dollar “appreciates astronomically against naira. The concessionaire borrows from foreign lenders. It has to pay back in dollar, although it collects toll in naira, which has really depreciated.”

In 2006, the concessionaire agreement was brokered with the state government investing $42 million (N5 billion), the Africa Development Bank (AfDB) $85 million (N10 billion), the Standard Bank of South Africa in collaboration with its subsidiary in Nigeria, Stanbic IBTC Plc $93 million (N11 billion) and indigenous banks, including First Bank Plc and United Bank for Africa Plc putting in $80 million (N9.5 billion).

However, Hamzat said  the   government was still discussing the matter with the concessionaire, adding:  “It is still fluid. We have not signed the required agreement with the LCC. We have not concluded the buy-back. It is after conclusion that the state government will be able to determine what will happen to the second toll plaza.”

He, therefore, assured the public that the state government would spread out details of the buyout deal “to the public. By the concessionaire agreement and the financial model, the LCC was expected to have increased the toll due to the exchange rate. When we are done with the completion, we will bring it up.”

On Ipaja-Ayobo road, the commissioner attributed the delay in its completion to the NNPC gas pipe installed across the road, noting that the area “is on the axis where we had disaster before. I will rather not do the road than to have another disaster. We will wait until the pipes are removed.”

“Safety is paramount. In order to avoid another pipeline explosion, we visited the headquarters of NNPC and demanded the drawing which shows the location, depth and length of the pipe.

“But to the surprise of the state government, there was no drawing. So, the absence of the drawing constrained us. This was why residents complained that the contractor was constructing the road manually rather than using the right equipment.

“We do not know the depth. Through our own investigation, we were able to detect that there were four pipes on the road; 50 metres apart from one another. But we do not know the state of the pipes and their depth. The state government was curtailed by lack of drawing of the road,” he added.

Hamzat also said the state government was planning  to relocate the gas pipes but it considered the cost of relocation, put at N700 million, as too much for it to bear alone.
At this instance, the commissioner explained that the contractor, PLYCON Nigeria Limited, had to resort to manual labour, which he said, the residents of the area “have been complaining about it bitterly.”

He also explained what the state government went through to get access to the left side of the road, a portion of land belonging to the federal government, adding that the state officials  had “to visit the Federal Ministry of Works in Abuja a number of times before they released the side of the road.”

“Those are the factors that determine the completion time for the projects. At the moment, the contractors are fixing the pavement stone. We have sent the road design to the NNPC because they demanded that whatever we must construct, it must be superimposed on what they have done.

“Part of the challenges still facing the road is getting the number of sand needed immediately. From the Lagos axis, at the construction level, we need 80 tippers daily. We are only able to get 50 tippers daily. The tippers associations in Lagos and Ogun were not cooperating. They could only supply 50. When we asked suppliers from neighbouring states to provide the shortfall, they declined,” Hamzat said.

Babatunde Akinsola
Babatunde Akinsola
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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