Nigeria has secured its first sovereign credit rating upgrade in 14 years after S&P Global Ratings raised the country’s long-term foreign currency rating from ‘B-’ to ‘B’, citing sustained economic reforms, improved external buffers, and expanding domestic refining capacity.
The upgrade, the first since 2012, comes with a stable outlook and follows similar positive rating actions by Fitch Ratings and Moody’s in 2025, signalling a gradual shift in global perception of Africa’s most populous nation.
The Federal Government described the decision as validation of its reform agenda, particularly foreign exchange liberalisation, fiscal consolidation, and ongoing tax reforms aimed at strengthening revenue mobilisation.
According to the government, the upgrade reflects growing confidence in Nigeria’s macroeconomic direction under President Bola Tinubu’s reform programme, which has included the removal of fuel subsidies, unification of exchange rates, and tax system restructuring.
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the upgrade “reinforces growing international confidence in Nigeria’s economic reform trajectory, policy consistency, and medium-term growth prospects.”
He added that the assessment by S&P highlights improvements in Nigeria’s external position, stronger balance of payments dynamics, rising oil production, expanding domestic refining capacity, and ongoing fiscal reforms aimed at improving debt sustainability.
A key focus of the reform agenda has been widening Nigeria’s tax base, with government projections targeting an increase in tax-to-GDP ratio from about 13 percent to 18 percent over the medium term.
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Nigeria’s macroeconomic environment remains mixed despite reform momentum.
The economy is projected to grow by about 4.1 percent in 2026, according to International Monetary Fund estimates, slightly above 4.0 percent in 2025, supported by improved oil output and gradual recovery in non-oil sectors.
One of the key drivers of S&P’s improved outlook is Nigeria’s exchange rate liberalisation, which has reduced distortions in the foreign exchange market and improved price discovery.
Since the reforms began in 2023, the naira has undergone significant adjustment and volatility before recent relative stabilisation driven by tighter monetary policy and improved FX inflows from oil and non-oil sources.
Despite the upgrade, Nigeria remains in speculative-grade territory at ‘B’, five notches below investment grade.
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This means the country is still classified as high risk by global investors, limiting the scale of potential borrowing cost relief.
A major pillar of the upgrade is Nigeria’s fiscal reform agenda, particularly efforts to improve revenue mobilisation.
Government estimates suggest that ongoing tax reforms could raise collections by up to 46 percent in 2026, pushing the tax-to-GDP ratio toward the 18 percent target over time.
S&P also noted improvements in Nigeria’s debt-to-revenue position, which has strengthened since 2023 and is expected to improve further if revenue reforms are sustained.
Higher global oil prices following geopolitical tensions in the Middle East have provided short-term fiscal relief for Nigeria, boosting export earnings and government revenue.
At the same time, rising domestic refining capacity, led by the Dangote Refinery, is expected to reduce fuel import dependence and ease pressure on foreign exchange reserves over the medium term.
However, higher oil prices also pose inflationary risks domestically, particularly through fuel and fertilizer-linked food costs.
While the upgrade signals progress, structural challenges persist. Nigeria continues to face elevated inflation pressures, high cost of living, external vulnerability to oil price shocks, and fiscal dependence on hydrocarbon revenues.
S&P itself maintained that Nigeria’s outlook remains stable rather than positive, indicating that while risks are easing, they have not yet structurally declined enough to justify a further upgrade trajectory.
The upgrade marks a symbolic but important step in Nigeria’s gradual return to stronger macroeconomic credibility in global capital markets.
Looking ahead, S&P expects continued fiscal and exchange rate reforms to support gradual improvements in Nigeria’s credit metrics. However, the agency noted that the approach of the 2027 elections could temporarily slow reform momentum, while elevated inflation, weak social indicators, and high debt servicing costs will continue to weigh on the sovereign profile.
Nigeria’s credit rating therefore remains anchored by a delicate balance: improving reform credibility and external resilience on one side, and entrenched structural and socioeconomic vulnerabilities on the other.
Ayomide Odunlami
Ayomide Odunlami is a Tax Reporter at BusinessDay, covering Nigeria’s tax reforms, compliance trends, and government revenue strategies. She reports on how evolving tax policies affect businesses, investors, and the broader economy, providing clarity on complex regulatory issues through data-driven journalism.
