Fitch Ratings raised its outlook on Nigeria’s Lagos state to positive from stable, citing “improving debt management” and moves toward a balanced budget by 2015.
Increasingly bonds with “fixed repayment schedules, longer maturities and monthly provisions into the debt reserves fund, are replacing the traditional concentration of short-term bank loans” for the state that includes the country’s commercial capital, Fitch said today in an e-mailed statement. “Fitch views this as a sign of the state’s improving debt management.”
Lagos, led by Governor Babatunde Fashola, sold 80 billion naira ($505 million) of debt in November, its third and biggest issue in six years, to fund developments including an urban rail system that needs about $1 billion to complete. The seven-year notes were priced with a 14.5 percent coupon.
With an estimated population of 20 million, Lagos is the top contributor to the economy out of Nigeria’s 36 states and may grow 10 percent this year, according to Fitch. Tax contributions to revenue may reach 80 percent in 2015 from 70 percent due to improved collection.