Fitch Ratings, an Internationally renowned rating agency, has upgraded Lagos ratings from AA+ (nga) to AAA(nga) for its good standing in terms of its debt sustainability, and resilience in its recent publication outlining the standing of the state.
Commissioner for Finance, Dr. Rabiu Olowo, said the feat was published in the Y2020/2021 rating report, noting that the upgrade of the National Long-Term rating reflects Lagos State’s strength compared with national peers as well as its resilient operating performance during the Pandemic.
The congratulatory message signed by the Senior Director, Head Sub-Saharan Africa, Mr. Andrew Parkinson, 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 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% of its N620B operating revenue at the end of Y2020.
The company maintained that the State has embarked on a number of finance cost savings initiatives over the years, through restructuring of local borrowings to reduce overall debt service obligations, pointing out that in November 2020, Lagos fully retired its N87.5Bn 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.
Lagos 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.