April 10, 2015 – International rating agency, Fitch has downgraded its Long term foreign currency Issuer Default Rating IDR for Lagos State to negative BB- from stable.
The agency however affirmed its National Long-term rating at ‘AA+(nga) adding that outlooks on the local currency IDR and on the National Long-term rating remain stable.
“The agency has simultaneously affirmed the Long-term rating of ‘BB-‘ and National Long-term rating of ‘AA+(nga)’ of its NGN275bn MTN programme as well as its NGN57.5bn and NGN80bn bonds, maturing in 2017 and 2019, respectively”, it said on its website.
Under EU credit rating agency (CRA) regulation, the publication of local and regional government (LRG) reviews is subject to restrictions and that it must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations.
Fitch said it publishes reviews where there is a material change in the creditworthiness of the issuer that makes it inappropriate for it to wait until the next scheduled review date to update the rating or Outlook/Watch status.
It said the next scheduled review date for Fitch’s ratings on Lagos State was originally 11 September 2015. But that it carried out the review following the downgrade of Nigeria’s Outlooks since the issuer is rated at the same level as the sovereign for the Long-term foreign currency IDR.
Fitch attributed the downgrade to operating margin declining towards 30%, unfavourable changes in the national tax policy, debt rising beyond expectations and economic instability.
“ Also, a downgrade of the sovereign would prompt a similar action on the ratings of the state, as subnationals’ ratings usually cannot be higher than their sovereign under Fitch’s criteria”, the agency said.