Agusto & Co. hereby upgrades the rating assigned to the Lagos State Government to “Aa-“
The rating expires on 30 September 2023.
Agusto & Co. hereby upgrades the rating assigned to the Lagos State Government (“Lagos”, “the State” or “LASG”) to “Aa-“ on account of the State’s resilient financial condition, robust financial flexibility and very strong capacity to meet local currency obligations in a timely manner from its internally generated revenue (IGR) which accounts for over 70% of total revenue over the last three years. Also, the assigned rating reflects Lagos State’s good and sustainable cash-generating capacity, acceptable expenditure profile and stable political environment elicited by the good working relationship amongst the tiers of government in the State. Although we note as a rating concern the rising stock of LASG’s public debts, we recognize positively that the concessionary rates as well as the longer tenors for most of them have reduced the annual debt service burden. Overall, we opine that Lagos State remains one of the most strategic and economically viable states in the country that can function independently of the share of centrally distributed funds.
In the financial year ended 31 December 2021 (FYE 2021), Lagos State recorded total revenue (including grants) of ₦770.8 billion, up by 17% from the prior year, while total expenditure rose to ₦840.7 billion (2020: ₦577.8 billion), resulting in a deficit of ₦69.9 billion (2020: deficit of ₦152.5 billion). However, if we adjust the net loss on foreign exchange transactions and non-cash depreciation, LASG would have reported total expenses of ₦685.3 billion and a surplus of ₦85.6 billion in 2021 (2020: deficit of ₦32.5 billion). In FYE 2021, LASG’s posted a positive net operating cash flow of ₦313.9 billion (2020: ₦269.5 billion) and an overall net cash position of ₦6.5 billion (2020: ₦43.4 billion) reflecting a strong cash generating capacity. In line with the International Public Sector Accounting Standards (IPSAS) for recognizing and measuring assets and liabilities, the State’s total identifiable assets and liabilities stood at ₦2.95 trillion (2020: ₦2.56 trillion) and ₦1.24 trillion (2020: ₦1.07 trillion) respectively as at FYE 2021.
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