Fitch upgrades Lagos ratings to AAA, praises it for good standing in debt sustainability

Fitch Ratings, a credit rating agency, has upgraded Lagos state ratings from AA+ (nga) to AAA (nga) for good standing in terms of its debt sustainability.

Rabiu Olowo, commissioner for finance, Lagos, disclosed this in a statement on Monday.

Olowo explained that the lifting of Lagos ratings to AAA reflects the state’s strength compared with national peers as well as its resilient operating performance during the COVID-19 pandemic.

He added that the current rating underpins the state’s capacity to service its financial obligations owing to its strong operating performance driven by internally generated revenue (IGR).

“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.

AAA is the highest possible rating that may be assigned to an issuer’s bonds by any of the major credit rating agencies. AAA-rated bonds have a high degree of creditworthiness because their issuers are easily able to meet financial commitments and have the lowest risk of default.

Fitch explained that Lagos benefits from a solid revenue structure driven by IGR, which represents 70 per cent of its N620 billion operating revenue at the end of 2020.

The company maintained that the state had embarked on some finance cost-saving 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 N87.5 billion bond.