Nigeria's Lagos state, home to the country's commercial capital and sub-Saharan Africa's biggest city, sold its biggest bond issue of 80 billion naira to fund infrastructure projects.
The seven-year notes were priced with a 14.5 percent coupon on Wednesday, the highest end of a revised range guidance, said Bolaji Balogun, chief executive of Lagos-based lead manager Chapel Hill Denham.
"In tricky market conditions, the book was slightly oversold, clearing the market in what was the single-largest issuance ever by a Nigerian state or sub-national," he said.
Proceeds from the sale will fund infrastructure projects including a rail line to help ease traffic congestion, said the Lagos governor Babatunde Fashola.
The state first issued debt in 2008, selling 50bn naira of five-year securities with a 13 per cent coupon. It concluded a 50bn naira, seven-year bond sale in April 2010 at a 10 per cent coupon.
The smallest of Nigeria's 36 states in terms of size, Lagos is the most densely populated, with about 22 million people living in the metropolitan hub, up from about 17 million in 2006, according to the state government.
The regional government is investing in infrastructure to meet the needs of a population it estimates is increasing at 3 per cent a year.
The sale comes after borrowing costs for Nigeria's federal government dropped after JPMorgan Chase said from last month that it would add the country's bonds to its GBI-EM index series. Barclays will add the debt of Africa's biggest oil producer and most populous nation to its own emerging market indexes in March.
The yield on the 16.39 per cent federal government naira debt due 2022 has dropped 81 basis points to 12.27 per cent this month, according to data compiled by the Lagos-based Financial Markets Dealers Association.