Lagos, Kaduna, two other states to borrow more, as Fitch upgrades credit ratings

• Lagos, Kaduna, and 2 different states person received a recognition people upgrade, acknowledgment to Fitch Ratings
• The planetary standing bureau noted, however, that risks persist successful the states contempt the improvements recorded truthful far
• This is coming connected the heels of a akin upgrade to Nigeria's sovereign recognition ratings from the bureau 2 weeks ago

Legit.ng writer Ruth Okwumbu-Imafidon has implicit a decennary of acquisition successful concern reporting crossed integer and mainstream media.

A planetary economical ratings bureau – Fitch Ratings – has upgraded the Long-Term Foreign- and Local-Currency Issuer Default Ratings for 4 Nigerian states.

These states person present been moved from ‘B-’ to ‘B’, indicating improved macroeconomic indicators and a affirmative effect to immoderate of the caller argumentation reforms successful the country.

Announcing the updated standing connected Saturday, Fitch noted that the outlook for each 4 states is stable, adjacent though immoderate risks persist.

Fitch ratings noted successful its announcement that the states person seen improved macroeconomics but this maturation is capped by Nigeria's recognition rating. Photo credit: Picture alliance/Pius Utomi Ekpei/KSG
Source: UGC

Recall that Fitch precocious upgraded Nigeria’s sovereign recognition rating from ‘B-’ to ‘B’ connected April 11, 2025.

It explained that the upgrade of the national government's ratings is mirrored successful the states owed to the intergovernmental relationships.

As explained by Fitch Ratings;

"B ratings bespeak that worldly hazard is present, but a constricted borderline of information remains. Financial commitments are presently being met. However, capableness for continued outgo is susceptible to deterioration successful the concern and economical environment.”

Why the revised ratings?

According to Fitch Ratings, present are the reasons down the ratings.

• A 20% + summation successful national VAT and oil-related transfers to the states, showing a beingness of fiscal support.
• Steep depreciation of the Nigerian naira, present predicted to transcend N1500/$ betwixt 2024 and 2028
• A high, but gradually declining inflation.

The bureau warned the states astir their external indebtedness exposure, noting that it poses a risk, fixed the naira depreciation.

• Kaduna authorities had 86% of its nonstop indebtedness denominated successful overseas currencies arsenic astatine the extremity of 2023, showing a precocious risk. The authorities however, had, 40% operating margins driven by internally generated revenues and national allocations, which was described arsenic strong. However, its indebtedness work capableness was defined to beryllium weak, based connected its payback ratio astatine 18 times.
• Kogi authorities besides had its indebtedness portfolio arsenic a premix betwixt home and overseas borrowings to money ambitious superior projects. Fitch highlighted a precocious vulnerability to the caller fluctuations successful lipid revenue, and this means a precocious risk.
• Lagos authorities besides has 50% of its indebtedness successful overseas currencies, but its exceptionally precocious internally generated gross moderates its risk. Where different states person IGR arsenic 25% of full operating revenue, Lagos authorities has 75%, reflecting a beardown fiscal position. The authorities besides has a payback ratio of 5 times, expected to stay truthful till 2028. Alone, Lagos state’s recognition illustration was enactment astatine ‘b+’, to bespeak beardown fiscal metrics astatine the precocious extremity of the ‘aa’ category, arsenic good arsenic its susceptible hazard profile.
• For Oyo state, its indebtedness illustration is mostly domestic, meaning a reduced vulnerability to FX fluctuations. The authorities besides has a coagulated payback ratio beneath 9 times, and a emergence successful national allocations. The hazard concerns travel from its over-reliance connected lipid revenues.

Fitch Ratings noted that the fiscal profiles of the authorities person improved, but remains capped by Nigeria’s sovereign recognition standing ceiling.

What does this mean?

Commenting connected the report, Samuel Oyekanmi, an concern expert astatine Norrenberger, said that the upgrade from 'B-' to 'B' mightiness look negligible connected paper, but makes a batch of difference.

Lagos authorities was precocious named the 2nd largest system successful Africa. Photo credit: Pius Utomi Ekpei
Source: Getty Images

Oyekanmi told Legit.ng that it could pull much investors and assistance these states entree the planetary indebtedness market.

He said;

"Its a study that shows that if overseas investors who could besides beryllium borrowers take to get to Nigeria, these states are imaginable little risky areas to consider."

Corroborating the statement, Ikemesit Effiong, spouse astatine SBM Intelligence, explained successful a chat with Legit.ng that the improved standing helps the states entree loans astatine amended rates.

His words;

"Ratings conscionable summation the imaginable for these states to get more. If said borrowings are channeled towards infrastructure roll-out, determination volition beryllium a nonstop payment to residents successful the state. In the end, argumentation formulation and execution volition beryllium the superior determinant of amended living outcomes."

Lagos authorities is present second-largest system successful Africa

Lagos State, Nigeria, present holds a caller presumption successful the database of Africa's largest economies.

It is not officially the second largest economy, 2nd lone to Cairo, the superior of Egypt.

This propulsion was triggered by respective commercialized activities successful the tiny state, including the caller 1 from Dangote Refinery.

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Source: Legit.ng