Fitch Upgrades Ratings of Kaduna, Kogi, Lagos, and Oyo States Following Nigeria’s Sovereign Upgrade

Fitch Ratings has improved the long -term defect (IDR) of long -term and local transmitters of Kaduna, Kogi, Lagos and Oyo of States of States of States ‘B-‘ has ‘B‘. According to information on agency The website, the prospects of the four states remain stable.

The upgrade follows the recent elevation of Nigeria Sovereign note at ‘B‘ Since ‘B-‘ April 11, 2025, driven by improving macroeconomic stability and current political reforms. Fitch explained that given the predominant role of the federal government in Nigeria Budget arrangements, including a mechanism of equalization that the disbursements transfer to the States, the action of sovereign notation has been reflected in the notes of the affected states.

“WE Consider the Federal government The role is predominant in intergovernmental relations, as it controls the mechanism of equalization promulgated by a system of transfers to the States. Consequently, the upgrading of sovereign IDRs is reflected in the upgrading of those of Kaduna, Kogi, Lagos and Oyo, because their autonomous credit profiles (SCP) align with or are superior to the notes of Nigeria,“” Said Fitch.

The main engines of the upgrade

Fitch’s Latest projections for states incorporated Several factors, including a more abrupt depreciation of the Naira, which should exceed 1,500 N in the US dollar between 2024 and 2028, and the persistence at,, But gradually declining,, inflation levels.

The agency also noted an increase of more than 20% of the value added federal tax (VAT) and transfers related to oil to states in 2024, providing a cushion for their financial situation. However, Fitch warned that the Naira weakness Intensifies the risk of debt service, especially for states with external exposure to external debt.

State analysis by state

Kaduna State (“BB”):

Kaduna remains strongly exposed to monetary risk, 86% of its direct debt denominated in foreign currencies at the end of 2023. Fitch projects the state The recovery ratio, an indicator of the service capacity of the debt, to remain approximately 18 times, reflecting low coverage and a high debt / income ratio. Nevertheless, Kaduna benefits from a high operating margin of around 40%, supported by regular growth in internal income (IGR) and an increase in federal allowances.

Kogi State (‘BB’):

Kogi The debt profile consists of both National and external loans, which have been mainly channeled in ambitious capital expenditure projects. THE state The recovery ratio should remain around 20 times in the medium term, pointing to A sustained pressure on its ability to serve the debt. Fitch has highlighted Kogi Based dependence on federal transfers linked to oil, which subjects its budgetary performance to high volatility linked to global oil prices.

State of Lagos (“AA”):

Lagos, Nigeria Economic Powerhouse, holds 50% of its direct debt in foreign currency. However, Fitch projects the state Recovery ratio to stay strong has About 5 times by 2028. Lagos Budget resilience is widely credited To its exceptional internal revenues, which represent 75% of its total operating income – far exceeding the national average of 25%. The state should also carry out a budget surplus in 2024, further strengthening its financial situation.

Above all, Lagos has retained its position as a state with the highest stock of national debts, with the latest report of the infrannational debt of the Debt Management Office (DMO) showing a national debt burden of 853.43 billion Nairas on September 30, 2024. This figure represents more than 20% of the 36 states of the federal capital.

This substantial debt burden underlines Lagos Unique status as Nigeria Commercial nerve center, where large -scale infrastructure investment requests continue to stimulate borrowing needs. However, Lagos A robust income base has maintained its sustainability of the debt within the manageable limits. In 2023, the state of Lagos generated 815.86 billion nairas in Igr – a figure that Eclipped the combined IGR of 29 other states, totaled N756.8 billion. Lagos also led in the Pay-As-You-Bearn (Pay) collections, ratifying in 444.7 billion Nairas. This coherent income performance has improved the state Solvency and would have influenced Fitch’s Favorable assessment for Lagos.

Oyo State (‘a’):

Oyo The debt portfolio is mainly named local currency, protecting the state of exchange risks. Fitch expects Oyo Recovery ratio to stay less than 9 times, helped by an increase in federal transfers. However, the agency reported volatility concerns due to the state high dependence on oil -related income and relatively Lower secondary budget metrics.

Lagos State The autonomous credit profile (SCP) has been assessed at ‘B+‘, reflecting a combination of a ‘Vulnerable‘ risk profile and financial parameters at the upper end of the ‘AA‘ category. Nevertheless, His IDRs are capped by Nigeria Sovereign assessment. Kaduna, Kogi and Oyo states Everyone maintains ‘B‘ SCPS, combining vulnerable risk profiles with financial measures positioned between the ‘A’ And ‘baby‘ categories.

Environmental, social and governance risks (ESG)

Fitch awarded Kaduna, Kogi and Oyo an ESG relevance score of 4 for biodiversity and natural resources management, reflecting their dependence on oil revenues to support financial operations.

Kaduna faces additional challenges related to the ESG, which include:

• Energy management: ineffective energy consumption and high dependence on the national network.
• Human rights and political freedoms: ethnic conflicts Continue to have a negative impact on civil rights.
• Human development: the state The human development index remains below the national average.
• Population and Demography: Kaduna records lower socio-economic indicators than the average a high proportion of Residents living below the poverty line.

These ESG challenges should remain Kaduna global development, even in the form of tax reforms continue Take place in the larger Nigerian economy.