Fitch Upgrades Credit Ratings of Lagos, Kaduna, Kogi, and Oyo States to ‘B’ with Stable Outlook
Fitch Ratings has elevated the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of four Nigerian states—Kaduna, Kogi, Lagos, and Oyo—from ‘B-‘ to ‘B’, maintaining a Stable outlook for all.
Macroeconomic Reforms Drive Sovereign-Linked Upgrade
The April 11, 2025 upgrade of Nigeria’s sovereign rating to ‘B’ triggered this reassessment, reflecting improved policy stability. Fitch emphasized the federal government’s dominant fiscal role, stating: “The upgrade of sovereign IDRs is mirrored in Kaduna, Kogi, Lagos, and Oyo as their Standalone Credit Profiles align with or exceed Nigeria’s rating.”
Key Factors Influencing the Decision
Critical considerations included:
- Projected naira depreciation beyond ₦1,500/USD through 2028
- Persistent but moderating inflation trends
- 20%+ growth in federal VAT and oil transfers in 2024
The agency warned that currency weakness amplifies debt risks for states with substantial foreign obligations.
State-Specific Financial Profiles
Kaduna State (‘bb’)
With 86% foreign-denominated debt, Kaduna faces acute currency exposure. Despite an 18x payback ratio indicating debt service strain, it maintains robust 40% operating margins through growing IGR and federal support.
Kogi State (‘bb’)
Kogi’s 20x payback ratio reveals debt service pressure, exacerbated by volatile oil-dependent revenues constituting 60% of transfers.
Lagos State (‘aa’)
Though 50% of Lagos’ debt is foreign-based, its exceptional 75% IGR contribution (versus 25% national average) supports a strong 5x payback ratio and projected 2024 surplus.
Oyo State (‘a’)
Primarily local-currency debt shields Oyo from forex volatility, with payback ratio below 9x. However, oil revenue dependence creates fiscal sensitivity.
ESG Risk Exposure
All states scored 4/5 for Biodiversity/Natural Resource risks due to oil reliance. Kaduna shows additional vulnerabilities in energy infrastructure (72% grid dependence), human development (HDI below national average), and poverty (42% below poverty line).
Source: Nairametrics