GCR Ratings, a leading credit rating agency in Sub-Saharan Africa (SSA) providing independent credit risk evaluations across more than 25 countries in the continent, has upgraded Ogun State Government of Nigeria’s national scale long-term and short-term issuer ratings to A(NG) and A1(NG), from BBB+(NG) and A2(NG), respectively, with a stable outlook.
The upgrade of the state’s rating reflects sustained tax-driven improvements in recurrent income, leading to robust cash flows, solid leverage metrics, and a stable liquidity position.
Despite the improved rating of the state, GCR Ratings noted that the ratings were constrained by high foreign currency debt risk and sustained elevation of gross debt.
According to the latest data, Ogun State’s business profile is supported by a diverse and increasingly industrialised economy, comprising manufacturing, agro-processing, services, and trade, positioning the state as a prominent investment destination.
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The rating agency, reported that Ogun State’s status as an industrial hub was enhanced by significant clusters in cement, FMCG, and manufacturing, alongside growing technology-enabled services that contribute to economic output and employment.
Other factors that boosted the state’s rating are its strategic location near Lagos, which facilitates access to major markets, transport corridors, and regional trade routes as well as the commencement of operations at the Agro-Cargo Airport, which further strengthens its logistics and agricultural value chain, while ongoing developments, including a seaport, are expected to enhance connectivity and attract future investments.
Noting Ogun State’s favourable socioeconomic indicators and expanding economic activity remain positive factors for its latest rating, the GCR researchers also identified the state’s expanding economic base as supporting its strong income growth, driven by a widening tax base. Internally generated revenue (IGR) increased by 22.3% to approximately NGN238.5 billion in 2025, aided by improved tax collections and revenue mobilisation.
Similarly, the rating data showed that rising prices also boosted the state’s VAT collections by 30% to N93.8 billion in 2025 (2024: N72.1 billion) but that even then Ogun State’s total recurrent income declined to N494.4 billion in 2025 (2024: N510.6 billion), mainly due to the non-recurrence of once-off federal transfers recorded in the prior year.
Similarly, the state’s recurrent expenditure rose by 10.4%, primarily due to increased personnel costs following the full implementation of the new minimum wage.
Overall, the state’s operating surplus remained sound, reflecting operational efficiency and the ability to fund a sizable portion of its development programme internally.
On the state’s revenue outlook, GCR Ratings projected: “We expect continued robust operating performance, driven by sustained IGR growth, improved revenue collection through technology-enhanced processes, and the implementation of initiatives aimed at improving the business environment and attract further investments.”
According to the rating report, the agency stated that the improved IGR, coupled with effective expenditure management, should support a sustained operating surplus and the capacity to fund higher capital expenditure, “although we remain cautious about the growth outlook due to collection inefficiencies associated with election cycles.”
The rating agency linked Ogun State’s capital structure as the major rating uplift factor, given the sustained improvements in leverage metrics, noting that this is driven by strong earnings growth and improved cash generation, which continue to support its debt-servicing capacity.
The GCR Ratings in its Note, reported that Ogun State’s gross debt stock rose by 7.8% to N470.3 billion as of 31 December 2025 primarily due to adverse exchange rate movements, with approximately 80.1% of total debt denominated in foreign currency.
However, it reported that the higher debt level was offset by the strong earnings performance supporting net debt to recurrent income at 81.7% in 2025 (68.2% in 2024) on the back of improved earnings.
The rating agency observed that the state’s free cash flow coverage of gross debt remained strong at above 50% in 2025 from 63.5% in 2024 on the back of strong operating cash flow and net interest coverage improved to 13x (from 9.2x in 2024), as improved earnings outpaced the impact of higher finance charges.
It projected that over the next 12 to 24 months, the state’s gearing metrics was expected to remain strong, barring any debt escalation or significant income underperformance relative to budgets.
GCR Ratings maintained that Ogun State’s capital structure was supported by diversified funding sources, mostly concessional loans and a long-term debt maturity profile, noting that foreign currency exposure poses downside risk, the Naira’s relative stability in 2026 mitigates further pressure on leverage.
In view of the anticipated risk, the rating agency forecasted: “We anticipate that stronger operating performance and continued debt repayments will support improved leverage metrics, although any substantial increase in foreign currency borrowings could weaken the profile and pressure the rating.”
It further noted that Ogun State’s liquidity remained positive, underpinned by an estimated robust cash reserve of N122.5 billion as of June 2026, alongside projected strong operating cash flow of approximately NGN552.5 billion to 2027.
The rating agency listed the state’s expected liquidity sources as including grant income of NGN35.4 billion, stressed by 60% relative to the state’s budget.
It projected that these liquidity sources would adequately cover maturing debt of around NGN102.2 billion, estimated capital expenditures of N436.2 billion, and contractual non-debt obligations of about N46.1 billion over the next 18-month period.
Overall, it estimated the state’s liquidity coverage at above 1.5x for the six months ending 31 December 2026, and 1.2x over the 18 months ending 31 December 2027, recalling that the state’s days cash on hand improved to 74 days as of June 30, 2026, indicating sufficient coverage for recurring spending requirements.
GCR Ratings maintained that the state’s stable outlook underscored the view that Ogun State would continue to generate robust income, which will improve capital projects implementation, enhance liquidity, and support further improvements in leverage metrics.
It, however, warned that possible revenue collection inefficiencies and strategy execution risks from approaching elections could moderate these strengths over the state’s outlook horizon in the months ahead.
