Rating Release

Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s up to ₦100 Billion Series I Bond

The rating expires on 30 September 2023.

Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s (“Lagos State”, “LASG”, “the Issuer” or “the State”) up to ₦100 Billion Series I: 10-Year Fixed Rate Bond Due 2032 (“Series I”, “the Issue” or “the Bond”) under the LASG’s ₦1 Trillion Debt and Hybrid Instruments Issuance Programme (“DAHI” or “the Programme”). The assigned Issue rating reflects our opinion on the State’s strong capacity to service the Series I Bond obligations (coupon and principal) jointly from the Lagos State’s Consolidated Debt Service Account (“CDSA”) funded from monthly internally generated revenue remittances and the issuance of an Irrevocable Standing Payment Order (“ISPO”) to be approved by the Federal Ministry of Finance.

In the financial year ended 31 December 2021 (FYE 2021) and the six months ended 30 June 2022 (unaudited), Lagos State’s financial condition remained very strong upheld by good and sustainable cash-generating capacity, acceptable expenditure profile, robust financial flexibility, very strong capacity to meet local currency obligations promptly from its internally generated revenue (IGR) which accounts for
over 70% of total revenue over the last three years as well as stable political environment elicited by the good working relationship amongst the tiers of government in the State. However, we note LASG’s rising stock of public debts as a concern but we recognize that the concessionary rates as well as the longer tenors for most of them have reduced the annual debt service burden while moderating the overall leverage profile of the State. Lagos State plans to issue up to ₦100 billion Series I Bond as part of an aggregate issuance of ₦134.8 billion under the DAHI in December 2022 to finance identified infrastructure projects in the State. The proposed Series I coupon will be determined through a book-building process and paid semi-annually over the ten-year tenor of the Bond. The Issue principal will enjoy a moratorium of 24 months from the Issue date and subsequently be amortized half yearly over the remaining eight years. In line with the Series I Trust Deed, the Issuer reserves the sole discretion to redeem all or part of the outstanding bond, after 5 years from the issue date provided not less
than 30 days’ notice is given to the bondholders.

The opinions expressed in this rating release do not represent investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.”