Fitch Ratings, an international rating agency, in its recent publication outlining the standing of the states has upgraded Lagos State ratings from AA+ (nga) to AAA (nga) for good standing in terms of the state’s debt sustainability, and resilience.
Communicating the development to Rabiu Olowo, the state commissioner for finance, Fitch said the feat was published in the Y2020/2021 rating report, noting that the upgrade of the national long-term rating reflects Lagos’ strength compared with national peers as well as its resilient operating performance during the COVID-19 pandemic.
The message signed by Andrew Parkinson, the senior director, head Sub-Saharan Africa, said: “I just wanted to say congratulations on the upgrade to AAA (nga). This is a fantastic achievement and an endorsement of all the good work going on in your department.” He stated that the current rating underpins the State’s capacity to service its financial obligations owing to its stronger operating performance driven by IGR, which makes Lagos an outliner in the national context.
“The assessment reflects Fitch’s view of risk relative to international peers with the ability to recover debt service with the operating balance”, he said. According to Fitch, Lagos benefits from a solid revenue structure driven by IGR, which represents 70 percent of its N620 Billion operating revenue at the end of 2020.
The company observed that the state government embarked on a number of cost-saving initiatives over the years, through the restructuring of local borrowings, to reduce overall debt service obligations, pointing out that in November 2020, Lagos fully retired its N87.5 billion Bond and also conducted an early redemption of its Programme 3 Series II (tranches I &III) as well as series 1 Bond in February 2021 and June 2021 respectively.
Recall that the state opted to call the bonds in order to take advantage of low yield environment (general low-interest rate) in the Money and Debt market while making significant savings in the overall cost of debt service. It has started the process of new bond Issuance at a lower coupon to replace the recalled bond and is poised to effectively increase its financial performance each year.
According to Olowo, Lagos’ reputation as issuer and player in the Nigerian capital market can be testified in its ratings nationally and internationally.