S&P Upgrades Nigeria’s Credit Rating Following Economic Reforms

S&P Global Ratings raised Nigeria’s long-term sovereign credit rating to ‘B’ from ‘B-‘, citing three years of sustained structural adjustments. The American ratings agency affirmed the short-term outlook as stable. This decision follows similar upward revisions by Fitch Ratings and Moody’s Investors Service, signaling a broader recovery of international confidence in the management of the economy. The Tinubu administration welcomed the announcement as validation of its fiscal policy direction. The state now hopes the improved rating will help lower its cost of borrowing on international financial markets.

Liberalisation of the foreign exchange market in 2023 sits at the heart of this upgrade. The ratings agency noted that a market-driven currency environment has significantly improved access to foreign currency. This policy shift has successfully restored investor confidence and supported non-oil economic growth. External financial cushions have also expanded. Foreign reserves climbed to approximately $50 billion, a substantial increase from the $33 billion recorded in 2023. This liquidity buffer shields the nation from sudden balance of payments shocks.

Higher oil production and expanded local refining capacity also drove the decision. Oil output rose to 1.66 million barrels per day due to better security measures against theft in the Niger Delta. The rapid expansion of the Dangote refinery to near its 650,000 barrels per day capacity further insulated the state. This domestic supply will help push the current account surplus to 5.8% of gross domestic product this year. These local energy supplies also offer protection against disruptions caused by the ongoing conflict in the Middle East.

Fiscal performance showed marked improvement due to domestic tax reforms and tighter state revenue collection. Executive Order 9 forced the national oil company to transfer a larger share of petroleum revenues directly to the federal treasury. Consequently, the national debt-to-revenue ratio is projected to fall to 33.8% this year, down from 50% three years ago. S&P forecasts that interest payments will absorb an average of 21.4% of revenue over the medium term. The state’s commitment to avoiding a return to costly fuel subsidies prevented wider budget deficits.

Stubborn domestic challenges still threaten this fragile macroeconomic progress. S&P warned that consumers face severe pressure from high fuel prices at the petrol pumps. Global oil market price trends continue to dictate local prices because the domestic refinery still relies partly on imported feedstock. The agency expects inflation to average 17.7% this year before cooling to single digits by 2028. These persistent economic pressures could complicate political dynamics as the country prepares for general elections next year.

The finance minister, Taiwo Oyedele, stated that the independent assessment proves that difficult policy decisions are yielding measurable benefits. The administration insists it will maintain a disciplined public financial management system to safeguard these gains. Officials acknowledged that the ultimate test remains translating these macroeconomic victories into better living standards for citizens. S&P indicated it could raise the credit rating further if fiscal consolidation continues to lower debt-servicing costs over the next two years.