The federal government has approved a $200 million loan for Lagos State to enable the state finance its infrastructural projects.
The loan will be sourced through a World Bank unit, International Development Association, IDA.
Rising from the Federal Executive Council meeting at the Presidential Villa in Abuja on Wednesday, the minister of Information and Culture, Lai Mohammed, said the approval by FEC followed a memo from the Minister of Finance, Kemi Adeosun.
He said Ms. Adeosun had sought the approval to obtain the loan from the IDA, a window of the World Bank in support of the Lagos state Development Policy Operation, DPO.
Giving more details on the loan, Mr. Mohammed said, "It would allow the state government to complete some of its very ambitious projects, notably the 61 kilometer, 10 lane Lagos to Badagry expressway, which also includes the 27 kilometre light rail".
He also said the loan would enable the state government to completely rehabilitate the inner roads in Apapa in addition to some other major works it is carrying out.
The minister of Works, Power and Housing, Raji Fashola, who is the immediate-past governor of Lagos State, also spoke at the briefing, saying the $200million approved by FEC on Wednesday was not actually a new loan.
"It is a segment of a programme of developmental initiatives. It was approved in 2010, a total sum of $600 million for Lagos State, to be disbursed in tranches of $200 million each year starting from 2011, 2012 and 2013," he said.
Mr. Fashola said accessing the loan by Lagos State suffered delays after the first tranche of $200 was received, "as a result of partisan political differences in the last dispensation".
He said there was a freeze after the first tranche was paid.
"The initial agreement we had with the World Bank was a 40-year loan, on a 10 year moratorium and 0.5% interest.
"But because of the delays that subsequently characterized the partisan interference that took place, our profile as a nation also changed.
"We had become a bigger economy, so, money was being lent to us not now as a highly indebted nation anymore.
"Because of the delay, by the time this one is approved now, we had lost the opportunity of 40 years.
"It is now a loan of 25 years, the moratorium has reduced to five years instead of 10 years, and the interest rate has gone up to 1.25%," he said.
The former Lagos governor, however, said it was heart warming to still obtain the loan at the reviewed indices since it helps to finance infrastructure.
"Infrastructure defines how big a nation can go. It is the defining line between rich nations and poor nations. That is the best way to distribute wealth in a society," he said.
He also said the fact that the World Bank now had the confidence to lend sums in that amount to sub national governments, was a testament to the financial discipline and strong governmental structures and the establishment of institutions put in place by the present administration.
He said it was good that rather than the World Bank writing programmes for states such as Edo, Ekiti and Rivers who have also benefitted, it is giving them direct loan through the federal government.
"This is the way to grow the economy of Nigeria, instead of states being told what to do.
"People continue to wonder how these monies are paid. Loans like this are actually deducted at source, at monthly FAAC meetings.
"The risk of default is therefore, very minimal. These are some of the deductions done to states during FAAC because the federal government is actually the recipient, as the state governments cannot directly access loans outside the country," Mr. Fashola said.