(The following statement was released by the rating agency)
LONDON/MILAN/FRANKFURT, March 21 (Fitch) Fitch Ratings has
State's Long-term foreign and local currency Issuer Default
Ratings (IDR) at
'BB-' with Stable Outlooks and its Short-term foreign IDR at
The agency has simultaneously affirmed the National Long-term
'AA(nga)' with Positive Outlook as well as the Long-term ratings
of 'BB-' and
'AA(nga)' of its NGN275bn MTN programme as well as its NGN57.5bn
bonds, maturing in 2017 and 2019 respectively.
KEY RATING DRIVERS
The affirmation reflects the state's weak socio-economic
international standards, which could eventually put the state's
under pressure, notably on health and education. The ratings
Fitch's expectations of the state's continuing solid operating
efforts towards an increasingly sophisticated and transparent
which is conducive to growing private sector investments. This
to balancing the budget by 2015, with stable debt coverage by
balance of around three years.
Fitch expects Lagos' revenue to remain highly diversified
compared with the
national average, due to forecast internal generated revenues
above NGN400bn by 2015, or 80% of total revenue, from about
NGN200bn in 2010
Under Fitch's base case scenario, Lagos' operating margin will
remain around 50%
in the medium term, supported by growing local taxes, and the
commitment to moderate cost growth. Plans to broaden the tax
improving collection methods could boost local tax receipts to
NGN330bn by 2015,
up from NGN185bn in 2012.
Fitch expects capital spending to remain at NGN250bn per year in
2014 and 2015
as the state continues to invest in transport, water, health,
social protection, in line with the levels recorded in 2013
(according to the
revised 2013 budget). With a policy aimed at attracting private
investment, Fitch believes the state could continue narrowing
the deficit to
achieve a balanced budget in 2015, from a peak deficit of 25% of
Under Fitch's base case scenario Lagos' debt will stabilise at
NGN350bn by 2015,
net of repayment provisions, with bonds representing about 50%
of total debt, up
from about 30% in 2009 and long-term debt accounting for about
75% of total
debt. These figures, if materialised, will reflect improving
with fixed repayment schedules, longer maturities and monthly
debt reserve funds.
The ratings could be upgraded if improvements in the budgetary
to debt stabilising below NGN0.5trn, while maintaining a high
30% component of
subsidised foreign loans, lowering the debt servicing burden.
of the local economy resulting in taxes remaining around 75% of
would also be positive for the ratings.
Conversely, an operating margin declining towards 30%,
unfavourable changes in
the national tax policy, debt rising beyond Fitch's expectations
instability, even at the local level, could lead to a downgrade.
+39 02 879087 216
Fitch Italia S.p.A.
Via Morigi, 6 - Ingresso Via Privata Maria Teresa, 8
+39 02 879087 203
+49 69 768 076 111
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com
THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS, OR PROVIDE
INFORMATION, BEYOND THE ISSUER'S AVAILABLE PUBLIC DISCLOSURE.
Applicable criteria, "Tax-Supported Rating Criteria," dated 14
August 2012, and
"International Local and Regional Governments Rating Criteria",
dated 09 April
2013, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria
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