Rating Release

Agusto & Co. affirms the “Bbb-” rating assigned to Lagos Free Zone Company with stable outlook

The rating expires on 30-06-23
 
Agusto & Co. affirms the “Bbb-” rating assigned to Lagos Free Zone Company (“LFZC” or “the Company”). The rating reflects the expanding stock of infrastructure at the Lagos Free Zone (“LFZ” or “the Zone”) and the strong parental support from Tolaram Group Incorporated (“TGI” or “Tolaram Inc.”), which we consider an enhancement to the credit quality of LFZC based on the financial backing it has continued to enjoy from the Group. However, the assigned rating is constrained by the Company’s lack of capacity to maintain a reasonable scale of operations (during the early stages of business development) to adequately cover operating and finance costs, which are mostly fixed in nature. This is in addition to concerns over the Company’s future earnings as the country’s worsening insecurity and uncertain political landscape continue to erode investors’ confidence, which could adversely affect overall occupancy rates at the Zone. The rating is further moderated by LFZC’s concentrated ownership profile and governance structure that requires strengthening.

LFZC is the licensee and operator of the Lagos Free Zone – the first privately owned economic zone in Nigeria. The 830-hectare Lagos Free Zone, which is integrated with a deep seaport (“the Lekki Deep Seaport”), is promoted by Singapore-based Tolaram Incorporated. The Zone is being developed based on the “Live-Work-Play” concept and will be equipped with built-up standard industrial and warehouse facilities. About 31 registered enterprises including some notable international brands have operational bases in the Zone as at year-end 2021.

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.