October 23, 2021

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Lagos State Credit Rating by FITCH Soars to Triple-A

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L-R. Dr Rabiu Onaolapo Olowo, Commissioner for Finance, Governor Babajide Olusola Sanwo-Olu

Lagos State Government continues to ride the crest in her savvy financial reengineering as the global agency, Fitch, a credit rating agency, has upgraded the state’s rating from double-A Plus, (AA+), to triple-A, (AAA), signifying the state government is in good standing in terms of its efficient and effective debt management.

According to the Commissioner for Finance, Mr Rabiu Olowo, Fitch maintained that the state government had embarked on some finance cost-saving initiatives over the years through restructuring of local borrowings to reduce overall debt service obligations and pointed out that in November 2020, Lagos fully retired its N87.5 billion bond.

Fitch explained that Lagos was able to meet its financial obligation because the government embarked on creating a solid revenue structure, driven by a purposeful IGR, which represents 70 per cent of its N620 billion operating revenue at the end of 2020.

The statement from the Finance Commissioner said, “the assessment reflects Fitch’s view of risk relative to international peers with the ability to recover debt service with the operating balance”, Olowo stated

He 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.

The commissioner 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).

Lagos Island Business District

Rabiu Olowo noted that “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.

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