Fitch upgrades Lagos, Oyo, two other states to stable

April 27, 2025

By Ayinde Adeleke

Lagos State has received a clean bill of health on its economy, thanks to Fitch Ratings, an internationally renowned rating agency.

The agency has upgraded the Long-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) of Lagos, Kaduna, Kogi, and Oyo states from ‘B-‘ to ‘B’, with a stable outlook.

The rating upgrade follows the upgrade of Nigeria’s sovereign rating to ‘B’ from ‘B-‘ on April 11, 2025, reflecting improved macroeconomic stability and policy reforms.

Fitch mirrored the sovereign upgrade in the affected states, given the predominant role of the federal government in Nigeria’s intergovernmental fiscal system.

According to Fitch, the upgrade is a testament to the strength of Governor Babajide Sanwo-Olu’s T.H.E.M.E.S Plus Agenda, the six-pillar economic plan of the Governor’s administration.

“We consider the Federal Government’s role predominant in intergovernmental relations, as it controls the equalisation mechanism enacted through a system of transfers to States,” Fitch noted.

The agency highlighted Lagos State’s exceptional Internally Generated Revenue (IGR), which accounts for 75% of its total operating revenue, far exceeding the national average of 25%.

“Supported by this strong revenue base, Lagos is also expected to record a budget surplus in Y2024,” Fitch added.

Fitch also noted that Lagos’s fiscal resilience is underpinned by its strong revenue base, but highlighted a notable exposure to currency fluctuations, with 50% of the state’s direct debt denominated in foreign currencies.

However, despite this, Fitch projects Lagos’s payback ratio to remain strong at around five times by the end of Y2028.

Governor Sanwo-Olu thanked Lagosians for their support, saying, “It is a good verdict on our performance – in terms of policy decisions and projects execution. It is also a call for us to be more active; we will be in every sector. I thank Lagosians for their support.”

The Governor’s administration has been working to improve the state’s economy and attract investments.

The rating upgrade is expected to boost investors’ confidence in Lagos State and the other affected states, and is a testament to the strength of their economic fundamentals.