Communicating the development to the
Commissioner for Finance, Dr. Rabiu Olowo, Fitch Ratings 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 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% 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.
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.
Lagos State’s reputation as a responsible
Issuer and player in the Nigerian Capital Market is not in doubt and this can
be testified in its Ratings Nationally and Internationally.
Furthermore, the State Government has
successfully restructured all existing loan facilities and brought about a
reduction in interest rates from an average of 18% to 12%., and delivered huge
savings on the State’s debt servicing cost thereby easing cash flow.
As further testimony to the credibility of
Lagos State, the N100bn Bond that was issued in January 2020 was listed early
this year on the FMDQ Exchange, NG Exchange. This has also given greater
visibility to the State, ensured transparency as well as increased the Bond
Holders confidence.