Tunis, 12 March 2008 – The Board of Directors of the African Development Bank (AfDB) Group on Wednesday in Tunis approved a senior loan of up to US$ 85 million to help finance the upgrade/rehabilitation of the Lekki to Epe expressway, linking Victoria Island with the Lekki peninsula in Lagos, Nigeria’s economic capital.
The project consists of upgrading, widening and tolling of the existing 49.5km long Lekki–Epe Expressway, which is the principal road artery linking Victoria Island in Lagos with the Lekki peninsula. The objective is to alleviate traffic congestion and improve road safety along the Lekki corridor. It is based on Public-Private Partnership (PPP) under the Design, Build, Operate (DBOT), and Transfer and Rehabilitate, Operate (ROT) framework/business model.
The first phase of the project will involve the upgrade/rehabilitation of the existing 49.5km long expressway, the construction of a new ramp to carry traffic onto the Falomo bridge, construction of new interchanges, footbridges, walkways and bus stops along the expressway, construction of 6 kilometers of the new 20-km long coastal road (which will serve as an alternative road up to toll plaza 1), and build 10 interconnecting link roads between the Expressway and the coastal road respectively. The company will also construct three toll plazas along the Expressway and will be responsible for the operation and maintenance of the toll road during the concession period.
Phase two consists of building the remaining 14 km of the coastal road, and is contingent on the Lagos State Government‘s completion of the civil works on the new coastal defenses (to check erosion) that will require additional financial resources.
The project sponsors, Asset and Resource Management Ltd, a reputable local firm, is partnering with Larue Projects Ltd. (Larue) as joint sponsors and, together, they play the role of "key investor" to the project.
As part of its due diligence, the Bank developed a detailed in-house financial model to quantify the economic benefits to the various stakeholders. The model results showed that the main beneficiaries of the project are the Nigerian road users who will enjoy a net consumer surplus of NGN 41.7 billion* in present value terms. Furthermore the Lekki toll road project will considerably alleviate the highly congested traffic situation in Lagos especially during rush hours. On completion, the toll road is expected to reduce travel times while improving road safety and security, lower vehicle operating costs for road users, create jobs, and provide much needed and well-maintained transportation infrastructure which will lead to an increase in business activities along the corridor.
The project is expected to create 635 short-term and 1,146 long-term jobs with a good proportion of the employees being women. Labor benefits have an estimated present value of NGN 1.1 billion, which represents the difference between the current earnings of labor and wages paid by the project.
The project is in line with Pillar II (the development of the non-oil sector) of the Bank’s country strategy paper (CSP) for Nigeria covering the period 2005-2009, which aims to sharpen support to private sector-led growth in infrastructure, agriculture and rural development. It is also in line with the Bank’s 2003 private sector development strategy, which emphasized building competitive infrastructure as one of its five key pillars, as well as the updated 2007 private sector operations strategy, for supporting public-private partnerships. As a local currency financing operation, it also adheres to the Bank’s strategy to support the development of local financial markets.
The project is considered as a landmark PPP and is in line with the master plan for Lagos State and also in line with the national development strategy of the Federal Republic of Nigeria with emphasis on strengthening the transportation infrastructure in order to meet the needs of its growing population by encouraging private sector-led investments in the transport sector.
The total project cost is approximately US$ 382 million, about NGN 44.91 billion The AfDB loan (total exposure) represents some 35% of the total senior debt. The Bank’s presence as part of the lending syndicate has provided significant value in the due diligence process. Other international lenders to the project include Standard Bank London. The Bank also played a key role in ensuring international best practice environmental impact assessment and ensuring adequate mitigation measures to be put in place during construction.
* 1 US$ = NGN 191.570 as at 18/06/2008