Rating Release

Agusto & Co. affirms the “Aa” rating assigned to Lagos State Government’s ₦100 billion 12.25% Ten-Year Fixed Rate Series III Bond Due 2030, with a stable outlook. 

The rating expires on 30 September 2027. 

Agusto & Co. hereby affirms the “Aa” rating assigned to the Lagos State Government’s (“Lagos State”, “Lagos”, “LASG”, “the State” or “the Issuer”) ₦100 billion 12.25% Ten-Year Fixed Rate Series III Bond Due 2030 (“the Issue” or “the Bond”). The rating reflects Lagos State’s strong and sustainable internally generated revenue (IGR), supported by its expanding tax base, efficient revenue collection system and diversified economy. The rating is also underpinned by the adequate balance in the Sinking Fund Account (SFA), which benefits from monthly ISPO deductions of ₦1 billion from the State’s statutory allocation and IGR contributions of ₦694.4 million. These inflows support the timely servicing of the Bond’s coupon and principal obligations.

In January 2020, the Lagos State Government issued a ₦100 billion Series III Bond to finance infrastructure projects across various sectors in the State. The Bond bears a fixed coupon of 12.25%, payable semi-annually until maturity in January 2030, with the principal being amortised on a half-yearly basis following the 24-month moratorium which expired in January 2022. Under the terms of the Trust Deed, Lagos State may redeem the Bond five years from the issue date, subject to regulatory approvals and 30 days’ notice to Bondholders. In our view, the State is unlikely to pursue an early redemption, given that refinancing the Bond at prevailing market rates would likely result in a higher financing cost.