Fitch Revises Lagos State’s Outlook to Positive
Fitch Ratings has revised Lagos State’s outlook to positive from stable and affirmed its Long-Term (LT) Foreign-Currency (FC) and Local-Currency (LC) Issuer Default Ratings (IDRs) at ‘B’.
Lagos, Nigeria’s economic centre, has a per capita GDP twice the national average, though it remains low by international standards, according to the rating note. The state’s per capita income is projected to rise from $1,224 in 2025 to $1,841 in 2027 as the economy expands.
Fitch noted that Lagos’s diverse economy generates about 20% of Nigeria’s GDP, driven by public and private investment and a population exceeding 20 million. Fitch forecasts Lagos’s real GDP growth at 4.3% for 2027, up from 4% in 2025.
The outlook revision follows the upgrade of Nigeria’s sovereign outlook to Positive on 9 October 2026, since Lagos’s ratings are capped by the sovereign rating.
The outlook revision does not affect the Standalone Credit Profile (SCP) or the LTFC and STFC IDRs. Fitch has affirmed the IDRs, and the SCP remains at ‘b+’.
Fitch rates Lagos’s SCP at ‘b+’, reflecting a ‘Vulnerable’ risk profile and an ‘aa’ financial profile.
The assessment also considers comparisons with other Nigerian states and international peers, particularly local and regional governments in South America.
The ‘b+’ SCP reflects Lagos’s operating performance, supported by strong internally generated revenue compared to the national average. Fitch’s through-the-cycle rating case incorporates stresses on revenue, costs, and financial risk.
The ratings agency estimates Lagos’s operating revenue will grow about 8% on average between 2026 and 2030, below nominal GDP growth.
Fitch expects transfer growth to be driven by oil price adjustments, the naira-to-US dollar exchange rate, and a higher VAT allocation beginning in 2026.
State operating expenses grew by about 14% on average during the period, driven by double-digit inflation and population growth.
The average cost of debt is estimated at about 8%, below the policy rate, because a significant share of it is low-cost multilateral debt.
State debt is expected to remain around N6.6 trillion between 2026 and 2030, assuming a naira-to-US dollar exchange rate of approximately 1,600 by the end of the rating horizon, according to Fitch estimates.
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