Lagos State’s profile as a pioneer in innovative financing reached a new milestone with the huge success of the state’s maiden green bond issuance. The first green bond by any African state government, the inroad into climate financing further extends the state’s ethical finance scope, having issued the largest sub-national Sukuk in Nigeria. With subscriptions to Lagos bonds reaching all-time high, Deputy Group Business Editor, Taofik Salako, examines the attractiveness of the state’s financing framework as a model for inclusive sub-national development
Lagos State expanded the scope and size of its developmental financing with the successful launch of the state’s green financing framework. Lagos State’s N14.815 billion 5-Year 16.00 per cent Fixed Rate Series 3 Green Bond 2030 marked another milestone in the state’s pioneering efforts at innovative financial management for long-term development. The first-ever sub-national green bond to be issued by any state government in Africa, the Lagos green bond, at the close of book build, received total bids of N29.29 billion, with N27.79 billion within the advised price guidance, a double of the offer size.
The green bond was part of a combined issuance that also included the fourth tranche of conventional bond issuance, under the state’s N1 trillion Debt and Hybrid Instruments Issuance Programme (DAHI). The Lagos State N230 billion 10-Year 16.25 per cent Series 4 Conventional Bond 2035 also set a new record, for the state and sub-national issuance. While the state had started with offer size of N200 billion, the book build attracted N310.06 billion, of which N304 billion were within the advised range. It was the highest subscription to any state issuance in Nigeria. Limited by regulations and excited by the enormous investors’ appetite, the state exercised the green shoe option and closed the fourth tranche at N230 billion.
Inclusive development
With the huge success of the two latest issuances, Lagos is building further inclusiveness into its financing as well as the general state development. Ethical finance, otherwise known as alternative finance, widens the scope of funding for issuers, especially non-corporate issuers like Lagos State, which seeks to drive diversity and growth. Ethical finance helps to narrow funding to specific areas while promoting inclusiveness by allowing investors with certain preferences to participate more actively in the financial system. For instance, green bond provides focused funding for critical infrastructure projects within the broad space of environment, sustainability and governance (ESG), directly or indirectly captured in the sustainable development goals (SDGs). From renewable energy to waste management, clean transportation, conservation, efficient housing and climate education and campaign among others, green bond broadens access to amenable finance for the public sector. Lagos had earlier, also under the DAHI programme, issued the largest and second subnational alternative bond, Sukuk, a Sharia-compliant global ethical instrument that aligns financing with Islamic principles of social good. The N19.815 billion 14.675 per cent Series II Fixed Return Forward Ijarah Sukuk, a seven-year instrument issued by Lagos State Infrastructure Sukuk SPV Plc, the special purpose vehicle of the LASG, was also oversubscribed, overshooting its target within three days of opening. Sukuk, which by nature must be asset-backed, specifically tied to an asset or a pool of assets, narrows funding to wide range of critical assets. The net proceeds of the Lagos Sukuk were earmarked for the construction and rehabilitation of the Awoyaya section of the Eti-Osa-Lekki-Epe Expressway.
Lagos is the melting pot of Nigeria’s diverse geographies and its growing portfolio of alternative finance not only promotes inclusiveness but underlines the value-minded leadership of the state, exploring the full extent of the state’s resources for sustainable economic growth. The issuances also support Lagos State’s quest to become the regional financial hub through the Lagos International Financial Centre, a joint initiative with the City of London. Cosmopolitan, in structures and processes, Lagos is strengthening its position as Nigeria’s anchor for the global financial markets. A Lagos that welcomes and brings prosperity to all.
New impetus for economic growth
The net proceeds of the two latest issuances, totaling N244.82 billion, would be used to expand critical infrastructure in key sectors such as transportation, housing, environmental sustainability, healthcare, and education, all aimed at driving sustainable and inclusive growth in the state.
The breakdown of utilisation showed that the proceeds would be used for expansion of highways to ease mobility across the state, construction and rehabilitation of roads aimed at boosting productivity and development of affordable housing schemes to meet the needs of growing population.
The funds would also be used to upgrade healthcare facilities, including the development of a new 280-bed hospital, install alternative solar power systems across schools and establish agro-processing hubs to strengthen food security.
At the combined signing ceremony to formally seal the two transactions, a visibly excited Lagos State Governor, Mr. Babajide Sanwo-Olu said the overwhelming response to the green bond was a strong endorsement of Lagos State’s vision for environmental responsibility, in alignment with the government’s THEMES+ Agenda.
The THEME+ Agenda is the expanded strategic development programme of the Sanwo-Olu administration aimed at driving a robust, inclusive and sustainable economy. From the initial THEMES Agenda, which focused on transportation and traffic management; health and environment; education and technology, the expanded strategy included focus on social inclusion, gender equality, and youth development.
“This is not just a financial transaction; it is a bold global statement. It reflects our confidence in the future of Lagos and reaffirms our shared commitment to sustainable development, responsible governance, and transformational growth,” Sanwo-Olu said.
He said the successive record of huge oversubscriptions that have been hallmark of bond issuance by his government was a popular endorsement of the economic programmes and financial discipline of the state.
He said: “This is now the largest bond issuance ever by Lagos State, and indeed by any subnational government in Nigeria. It is a resounding vote of confidence in the vision, governance, and fiscal discipline of Lagos State. This trust is precious, and we do not take it for granted”.
He reassured that the government would use the funds prudently for the execution of outlined projects.
“To our investors: thank you for your confidence. Your investment is not merely financial, it is a lifeline for the aspirations and future of almost 25 million Lagosians.
“We remain firmly committed to accountability, transparency, efficiency, and prudent management of public resources. Every naira entrusted to us will translate into tangible improvements in the lives of our people. This is my solemn pledge as your Governor.
“Together, we are building a Lagos that is resilient, sustainable, inclusive, globally competitive, and full of shared prosperity,” Sanwo-Olu said.
The conclusion of the two bonds also coincided with the recognition of Sanwo-Olu as “TIME Africa Impact Personality of the Year” by the e TIME Africa Impact Summit, which held in Johannesburg, South Africa. The award recognised the Sanwo-Olu’s administration inclusive growth initiatives and commitment to fostering economic prosperity.
Lagos State Commissioner for Finance, Mr. Abayomi Oluyomi said the maiden green bond issuance reflected Lagos State’s unwavering commitment to climate-friendly development, infrastructure sustainability, and environmental resilience.
He noted that the rigorous project selection process undertaken for the green bond underscored the state’s dedication to financing initiatives that align with the United Nations Sustainable Development Goals (SDGs) and deliver measurable environmental impact.
He pointed out that the state had obtained a credible second-party opinion on the green bond, noting that the bond fully met global green bond standards, having been certified by the internationally recognised Climate Bonds Initiative.
He said that while regulatory thresholds limited the final size of the conventional bond issuance, the state now has a prospective higher target of N300 billion to N500 billion, given robust market participation.
“These successes reflect both the commitment of Lagos State to responsibly access and utilise the domestic capital market, and the sustained confidence investors continue to show in our economy.
“With a benchmark now approaching N300 billion and potentially reaching N500 billion in the future, we are optimistic that upcoming issuances will continue to attract robust market interest,” Oluyomi said.
Chief Executive Officer, Chapel Hill Denham, the lead issuer, Mr. Bolaji Balogun, said that while many states in Nigeria face challenges in issuing bonds due to transparency and compliance issues, Lagos stands out as a beacon of best practices and innovation.
He said: “I believe strongly that the world is becoming increasingly African, and Lagos—this remarkable city-state—stands firmly at the center of that shift. Lagos can only continue to lead by leveraging the public markets in a substantial and strategic manner. Many years ago, Lagos set a record as the first state to issue in the public markets, and through successive administrations, that continuity of governance has remained one of the reasons the markets continue to support the state.
“This N230 billion issuance is not only the largest ever by a sub-national entity in Nigeria, but also the largest by any issuer in this market aside from the sovereign. To become the first sub-national in Africa to issue a green bond is no small feat”.
Representative of the Deputy High Commissioner and Nigeria Finance & Investment Mobilisation Lead, British High Commission, UK Foreign Commonwealth Development Office, Temilola Akinrinade, said the issuance was as a result of a long-term partnership between Lagos State and the United Kingdom (UK) Government, which included support in developing a green bond framework.
She noted that the Lagos issuance came at a crucial time with countries seeking long-term climate-competitive financing.
She added that the significant oversubscription of the bond issuance showed that Lagos State can effectively access capital markets, attract strong demand, and set a precedent for other regions, creating opportunities for climate-resilient growth.
She said: “This strong investor response demonstrates clear confidence in Lagos State’s strategic direction, governance, and financial discipline. It also reflects the growing strength of Nigeria’s economic reforms led by His Excellency, the President of the Federal Republic of Nigeria, which are opening new opportunities for sustainable growth”.
She said UK was proud of its enduring partnership with Lagos State and Nigeria, which aimed at driving mutual prosperity.
“Just one year ago, our Foreign Secretary signed the new UK–Nigeria Strategic Partnership, which continues to strengthen our shared growth ambitions through the UK–Nigeria Enhanced Investment and Trade Partnership. A major pillar of this partnership is mobilising financial investment to support economic opportunities in both countries,” Akinrinade said.
High ratings
Market analysts said the success of the Lagos issuances was premised on the state’s strong financial management. A self-sustaining state, Lagos has continued to improve its financial performance over the years, unlocking fresh opportunities with every new investment. Key extracts of the audited accounts of the state for the year ended December 31, 2024 showed that tax incomes rose from N679.42 billion in 2023 to N1.04 trillion in 2024, substantially above the state’s total operating expenses of N790.49 billion in 2024. State’s total operating revenue doubled from N1.22 trillion in 2023 to N2.34 trillion in 2024. Statutory allocation, which stood at N769.45 billion in 2024, represented just about one-third of the state’s total revenue. With operating surplus of N1.53 trillion in 2024 as against N677.18 billion in 2023, the state closed with a net surplus of N168 billion for the year, after scaling up capital expenditures and funding other charges, including previous bond issuances. The state’s total assets based expanded to N4.9 trillion in 2024 as against N3.61 trillion in 2023. The financial performance of the state strengthens the irrevocable standing payment order (ISPO) issued against the state’s statutory allocation as a guarantee for the bond issuances.
GCR Ratings (GCR), which had in July 2025 affirmed the state’s national scale long-term senior unsecured rating at AA-(NG), assigned an indicative long-term issue rating of AA-(NG)(IR) to the state bond issuance.
“The stable outlook reflects our opinion that Lagos State will continue to achieve sound operating performance that supports capital project implementation and allows for debt service costs to be adequately covered,” GCR stated on the outlook for the state economy.
Agusto & Co assigned an indicative “Aa” rating to the latest bond issuance, citing the state’s strong capacity to service its debt, the “state’s very good financial condition, supported by its sustainable cash-generating capacity, balanced expenditure profile and robust ability to meet local currency obligations from its internally generated revenue (IGR), which averages 70 per cent of its total revenue”. Analysts also pointed at the state’s “stable political environment characterised by effective coordination across tiers of government”.
According to analysts, while the rating was tempered by unhedged foreign currency exposures that heightened vulnerability to exchange rate depreciation, the risks were moderated by the state’s relatively low debt service-to-revenue ratio, supported by concessional terms and long maturities on its borrowings.
Analysts at Agusto & Co described the Lagos bond as “high quality debt issue with very low credit risk; very strong capacity to pay returns and principal on local currency debt in a timely manner”.
As noted by Akinrinade, the significant oversubscription of the Lagos bonds signaled a clear direction for other states, for a journey of financial discipline, self-reliance and sustainable economic growth.
She said: “Lagos State has demonstrated to other subnational governments in Nigeria and around the world that they can access capital markets at scale, attract strong investor demand, and issue high-quality instruments. This sets an important precedent and offers a compelling roadmap for others to follow-one that creates real opportunities to mobilise capital for climate-resilient and sustainable growth”. For Lagos, it is not only about bricks and mortars, but also about innovations and togetherness.
