Rating Release
Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s proposed up to ₦200 billion Series 5: 10-Year Fixed Rate Bond due 2036, with a stable outlook
The rating expires on 30 September 2027.
Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s (“Lagos State”, “Lagos”, “LASG”, “the Issuer” or “the State”) proposed up to ₦200 billion Series 5: 10-Year Fixed Rate Bond due 2036 (“Series 5 Bond”, “the Bond” or “the Issue”) under its ₦1 trillion Debt and Hybrid Instruments Issuance Programme (“DAHI Programme” or “the Programme”). The assigned rating reflects our view of Lagos State’s strong capacity to meet the Bond’s coupon and principal obligations, supported by a structured repayment mechanism comprising monthly contributions from the Consolidated Debt Service Account (CDSA), funded from internally generated revenue (IGR), and deductions from statutory allocations pursuant to an Irrevocable Standing Payment Order (ISPO) to be approved by the Federal Ministry of Finance (FMF). The rating is further supported by LASG’s very good financial condition, underpinned by its sizeable and diversified economy (estimated at ₦62.5 trillion in 2025), robust revenue-generating capacity and high degree of fiscal autonomy, with IGR averaging circa 70% of total revenue over the past three years. In addition, we recognise the State’s relative political and administrative stability, which has supported policy continuity and the implementation of long-term development programmes. However, the rating is constrained by LASG’s substantial unhedged foreign currency borrowings, which heighten its exposure to exchange rate volatility. Nonetheless, we recognise the State’s satisfactory debt service metrics, supported by the long-dated and largely concessional nature of its external borrowings.
Lagos State plans to issue up to ₦200 billion Series 5 Bond in the third quarter of 2026 under its ₦1 trillion Debt and Hybrid Instruments Issuance Programme to finance selected transportation, healthcare and infrastructure projects across the State. The coupon on the proposed Bond will be determined through a book-building process and payable semi-annually over the ten-year tenor of the Issue. The principal will enjoy a 36-month moratorium from the Issue Date and will thereafter be amortised semi-annually over the remaining seven years.