Lagos State total debt (including lease liabilities) spiked by 32.9% to NGN2.9 trillion at the end of 2024 largely due to the adverse foreign exchange (FX) movement.
However, the impact of the increased debt was absorbed by the strong earnings performance, supporting firmer leverage metrics.
Net debt to recurrent income strengthened to 1.21x (2023: 1.70x), free cash flow coverage of gross debt increased to 46% (2023: 25%) and net interest coverage improved to 9.3x in 2024, compare to 5.2x in 2023, according to data from ratings agency GCR.
Lagos State has increasingly relied on borrowings to finance infrastructural development, leveraging its access to local and international financiers, as well as the Nigerian capital market.
About 69% of Lagos State gross debt is foreign currency denominated, meaning FX exposure is a major risk.
In addition, the state is also exposed to interest rate risk from bank loans, but this is somewhat moderated by the long-standing funding relationships with the banks.
Lagos State expects to borrow N300 billion in new debt in the near term, and the proceeds are to be used to partly fund ongoing capital projects.
Lagos State’s existing bonds comprise series 2 (tranches II and IV), series 3 and series 4 issued under the NGN500 billion bond issuance programme 3 as well as series I fixed rate bonds and series II forward-ijarah sukuk under its NGN1 trillion hybrid bond issuance programme 4.
Lagos State is Nigeria’s commercial and economic hub, with a diverse and robust internal economy contributing about 20% of the national GDP.
The state’s economic landscape is dominated by a buoyant services industry accounting for about 90% of economic output.
The strong economic base has positioned the state as the top investment destination in Nigeria, with higher wealth levels as indicated by GDP per capital trending above the national average.
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