Just seven days after slashing Nigeria’s Gross Domestic Product (GDP) growth rate to 1.5percent for 2016, Fitch Ratings has downgraded Lagos State on its credit ratings.
On June 23, Fitch revised Nigeria’s credit rating to “B+; outlook stable”, adding that GDP growth will fall to 1.5percent in 2016 from 2.8percent in 2015.
On Thursday, June 30, the revered agency downgraded Lagos’ long-term foreign currency Issuer Default Rating (IDR) to “B+” from “BB-” with a stable outlook.
“The downgrade reflects the application of Fitch’s ‘International Local and Regional Governments Rating Criteria – Outside the United States’,” the agency said in a statement.
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“Under our criteria, a local or regional government can be rated above the sovereign only in exceptional circumstances.
“Therefore, following the downgrade of Nigeria’s Long-Term foreign currency IDR on 23 June 2016 we have taken a similar rating action on the state as it is rated at the same level as the sovereign.”
Explaining the downgrade, Fitch said the Lagos state debt profile was rising above its expectations, to about N400 billion on the medium term.
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The rating actions are as follows:
– Long-Term foreign currency IDR: downgraded to ‘B+’ from ‘BB-‘; Outlook Stable
– Long-Term local currency IDR: affirmed at ‘BB-‘; Outlook Stable
– Short-Term foreign currency IDR: affirmed at ‘B’
– National Long-Term rating: affirmed at ‘AA+(nga) ; Outlook Stable
– Issue ratings on the MTN programme and senior unsecured bonds: affirmed at local currency ‘BB-‘ and National Long-Term ‘AA+(nga)’
Fitch said “further improvement of the local economy giving additional boost to internally generated revenues would also be positive for the ratings”.
According to the published sovereign and local and regional governments rating review calendar, the next review date for Lagos state is September 2, 2016.
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