Fitch Ratings has upgraded Cross River State’s Long-Term Issuer Default Rating (IDR) to ‘B’ from ‘B-’, assigning a Stable Outlook.
The improved rating reflects the application of a one-notch uplift for budget loan support to the state’s unchanged Standalone Credit Profile (SCP) of ‘b-’.
This was contained in its latest assessment on its website.
According to Fitch, “The upgrade reflects the application of a one-notch uplift for budget loan support to Cross River’s unchanged ‘b-‘ Standalone Credit Profile (SCP). This is allowed due to both the upgrade of Nigeria to ‘B’/Stable and Cross River’s access to intergovernmental loans, which Fitch considers junior to market and multilateral debt (leading to an enhanced payback close to 8x in our rating case scenario). The ‘b-‘ SCP also incorporates the volatile operating environment and is notched down once for asymmetric risk related to below-standard reporting for debt maturities and interest payments.”
Revenue challenges and outlook:
Fitch noted that Cross River’s revenue base remains weak and heavily reliant on federal transfers.
Over 70% of the state’s income comes from VAT and statutory allocations dependent on oil revenue, leaving the state exposed to market volatility and federal disbursement delays, the rating agency noted.
The state’s Internally Generated Revenue (IGR) stands, according to Fitch, at just about 25% of total operating revenue, below the median of Nigerian states.
However, the state has made strides, recording an average 20% growth in IGR over the last five years.
In 2023, the IGR rose by 86% compared to 2022, and 2024 estimates suggest a further 50% year-on-year growth, the assessment stated.
Despite this progress, Fitch stressed that the state’s capacity to significantly broaden its tax base remains limited.
“Cross River’s revenue potential depends on its ability to broaden its tax base and enforce tax compliance. The state’s large informal economy, dependent on agriculture, and the low income of its population limit its ability to expand the tax base,” Fitch noted.
Debt and fiscal planning
Fitch projects that Cross River’s net Fitch-adjusted debt will rise sharply to around N800 billion, driven by a combination of increased borrowing and currency depreciation.
The state’s FX debt, which accounts for approximately 60% of adjusted debt, is expected to appreciate under a scenario where the naira weakens to between NGN1,600–1,800 per US dollar.
The projected rise in debt is also tied to the state’s ambitious capital expenditure (capex) program, which involves NGN0.5 trillion in infrastructure and development investments over the next five years.
“Cross River’s enhanced financial profile is stronger than comparable Nigerian states such as Kaduna and Kogi (B/Stable, long-term financial profile of ‘bb’) but slightly lower than Oyo (B/Stable, long-term financial profile of ‘a’),” the assessment stated.
Why this matters
This upgrade marks a significant development for Cross River State’s creditworthiness, offering increased investor confidence and better terms for accessing capital markets.
It also comes as Nigeria’s own sovereign rating was recently upgraded, influencing subnational ratings.
