Home SOCIETY GIST COMMUNITY GIST FITCH RAISES LAGOS’ RATINGS TO AAA, VERIFYING ITS STABILITY AND RELIABILITY

FITCH RAISES LAGOS’ RATINGS TO AAA, VERIFYING ITS STABILITY AND RELIABILITY

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By Aishat Momoh. O.

Fitch Ratings, an internationally known rating agency, has improved Lagos State’s ratings from AA+ (nga) to AAA(nga) for its good standing in terms of debt sustainability and resilience, according to a recent publication summarizing the state’s standing.

FitchRatings informed the Honourable Commissioner for Finance, Dr. Rabiu Olowo, of the achievement in the Y2020/2021 rating report, noting that the upgrade of the National Long-Term rating reflects Lagos State’s strength in comparison to national peers as well as its resilient operating performance during the Pandemic.

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Mr. Andrew Parkinson, Senior Director, Head Sub-Saharan Africa, said in a congratulatory note, “I just wanted to say congratulations on the upgrade to AAA” (nga). This is a tremendous accomplishment and a testament to all of your department’s hard work.”

According to him, the present grade underlines the state’s ability to service its financial obligations due to its superior operating performance, which is powered by IGR, making Lagos a national outliner.

“The rating reflects Fitch’s assessment of risk in comparison to international peers, as well as the ability to recover debt service from the operating balance,” he said.

According to Fitch, Lagos has a strong revenue structure, with IGR accounting for 70% of its N620 billion operating revenue at the end of 2020.

The company stated that the state has undertaken a number of financial cost-cutting initiatives over the years, including restructuring local borrowings to reduce overall debt service obligations, noting that Lagos fully retired its N87.5 billion bond in November 2020 and also completed an early redemption of its Programme 3 Series II (tranches I & III) and Series 1 Bond in February 2021.

Remember that the State chose to call the Bonds in order to benefit from the low yield environment (generally low interest rate) in the Money and Debt markets while lowering the overall cost of debt payment. It has begun the process of issuing new bonds with reduced coupons to replace the recalled bonds, and it is on track to significantly improve its financial performance each year.

Lagos State’s reputation as a responsible issuer and participant in the Nigerian capital market is undeniable, as evidenced by its national and international ratings.

Furthermore, the State Government has effectively restructured all existing credit facilities, resulting in a drop in interest rates from an average of 18 percent to 12 percent, as well as significant savings in debt servicing costs for the State, alleviating cash flow.

The N100 billion bond, which was issued in January 2020, was listed on the FMDQ Exchange, NG Exchange, earlier this year, as further proof of Lagos State’s trustworthiness. This has also provided the state more visibility, ensured transparency, and enhanced bondholder confidence.

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