Global credit ratings agency Moody’s has upgraded Nigeria’s sovereign rating from Caa1 to B3, highlighting substantial progress in the nation’s external and fiscal positions.
This positive revision signals growing confidence in Nigeria’s economic stability and future outlook.
In its statement, Moody’s emphasized the impact of recent changes in Nigeria’s foreign exchange management framework, saying it has improved the balance of payment.
“The recent overhaul of Nigeria’s foreign exchange management framework has markedly improved the balance of payments and bolstered the CBN’s (Central Bank of Nigeria) foreign exchange reserves.”
Nigeria’s economic outlook adjusted from positive to stable
Alongside the rating upgrade, Moody’s has adjusted Nigeria’s economic outlook from positive to stable.
The agency anticipates continued improvements in the country’s external accounts and fiscal health, albeit at a slower pace, particularly if oil prices experience a downturn.
“The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely,” Moody’s noted.
Key drivers
A key factor influencing the decision is Nigeria’s progress in mitigating inflationary risks. While past policy changes led to inflationary pressures, recent economic strategies have helped stabilize borrowing costs and price growth.
Additionally, the World Bank has recognized Nigeria’s notable economic performance, reporting that the nation recorded its fastest growth in nearly a decade in 2024, driven by a robust fourth-quarter expansion and enhanced fiscal management.
Despite these positive developments, experts caution that persistent inflation remains a challenge, requiring sustained economic policies to ensure long-term stability.
What you should know
- In April, Fitch Ratings upgraded Nigeria’s outlook to Stable from Negative, highlighting renewed confidence in the Tinubu administration’s commitment to far-reaching policy reforms.
- While Nigeria’s long-term foreign currency rating remains at ‘B’, Fitch says the economic direction taken since mid-2023 is starting to bear fruit.
- The reforms exchange rate liberalisation, tighter monetary policy, removal of fuel subsidies, and an end to deficit monetisation, have improved macroeconomic credibility, reduced distortions, and enhanced resilience to shocks.
“We are seeing clear signs of increased commitment to market-based reforms under President Tinubu’s administration,” Fitch stated. “While challenges remain, Nigeria’s trajectory has shifted toward stability and greater investor confidence.”
A key turning point was the Central Bank of Nigeria’s introduction of a new FX matching platform and FX code in 2024 to enhance price discovery and transparency. Following a 40% naira depreciation last year, these reforms helped narrow the official-parallel market gap and boosted FX liquidity.
