Fitch Ratings affirms Nigeria's Kwara State at 'B+'/'AA-(nga)

Jun 04, 2010

The international ratings agency Fitch affirmed the Nigerian State of Kwara's long-term foreign and local currency ratings at B+ and national long-term rating at AA-(nga).

The outlooks for both are stable, but the ratings could be upgraded if the increase of own-source revenue provides more budget flexibility in combination with debt growth below the expectations, the agency said in a statement issued 27 May, 2010. If the state's spending will be more rigid than expected, raising expectations that the operating margin could fall below the 35% average posted over the last few years, the ratings could conversely be downgraded, Fitch said.

The rating agency pointed out that - mindful of dwindling oil-related revenues - the administration cut back on overheads and other costs. Therefore the operating surplus peaked at NGN 17 billion (about US$ 112,000,000), or 46% of operating revenues, up from the 33% average in 2007-08. Keeping operating spending growth below revenue increases should enable the state to keep the operating margin around 35% over the medium term, Fitch argues.

Kwara is located in central Nigeria, between Lagos and Abuja. It has about three million residents and is the 11th-largest state by territory. The agriculture sector employs 80% of the workforce, and the development of commercial agriculture, food processing and infrastructure investment offer strong prospects of GDP growth.This would help to raise Kwarans' standard of living, where GDP per capita is about NGN 130,000 (US$ 1,000).