Global Rating Firms Lift Nigeria’s Debt Outlook Amid Economic Reforms

Nigeria’s sovereign credit outlook has turned positive at two major global rating agencies in less than two months, reflecting improving foreign exchange reserves, stronger external buffers and progress in economic reforms, even as inflation and high debt-servicing costs continue to constrain the economy.

Moody’s Ratings revised the West African nation’s outlook to positive from stable on August 28, 2026, for the first time since December 2023, while affirming its B3 sovereign rating. Fitch Ratings followed on October 9, revising Nigeria’s Long-Term Issuer Default Ratings outlook to positive for the first time since 2024 from stable while affirming its B rating.

The moves follow S&P Global Ratings’ upgrade of Nigeria’s sovereign rating to B from B- in May, although it maintained a stable outlook. 

The actions signal improving confidence in the country’s economic policy direction, but its ratings remain below investment grade.

“With this action, all three major international rating agencies have taken positive rating actions on Nigeria in 2026,” Taiwo Oyedele, minister of finance and coordinating minister of the economy, said in a statement on Saturday.

A positive outlook for Africa’s most populous nation indicates that a rating upgrade could follow if improvements in economic performance and policy implementation are sustained. 

Sovereign ratings help investors assess a country’s creditworthiness and influence its access to international capital and borrowing costs.

Nigeria’s gains reflect wider African shift

Moody’s has also revised its outlook for sub-Saharan Africa to positive, citing reforms that have helped countries weather inflationary pressures, while strong commodity prices and improved access to financing have supported public finances.

Of the 25 sovereigns assessed, eight have positive outlooks: South Africa, Namibia, Angola, Nigeria, Togo, Ghana, the Republic of Congo and Zambia.

Thirteen have stable outlooks, while four — Mauritius, Gabon, Mali and Senegal — have negative outlooks.

The regional shift suggests improving credit conditions across parts of Africa, although countries continue to face differing fiscal pressures and exposure to external shocks.

Separately, FTSE Russell returned Nigeria to Frontier Market status, effective September 21, 2026. Oyedele said the decisions reflected an increasingly favourable assessment of the country’s reform trajectory.

He said Fitch’s decision validated reforms under President Bola Ahmed Tinubu, including fuel subsidy removal, exchange-rate unification and tax reforms.

“Our medium-term ambition is to place Nigeria firmly on the path to investment grade,” Oyedele said, adding that the government aimed to lower the cost of capital, attract private investment and create jobs.

Reserves strengthen external resilience

Fitch said monetary and exchange-rate reforms had supported greater naira flexibility, disinflation and faster-than-expected foreign exchange reserve accumulation. Improvements in reserve quality have also strengthened Nigeria’s capacity to withstand external shocks.

“The Outlook revision reflects ongoing reform of the policy framework and Fitch’s increased confidence that momentum will not be disrupted by upcoming elections,” the agency said.

Moody’s similarly highlighted rising foreign exchange reserves and a current account surplus as evidence of a stronger external position. It expects the surplus to remain sizeable even under materially lower oil prices, indicating greater resilience to crude market volatility.

Fitch forecasts Nigeria’s real GDP growth at 4.3 percent in 2026, up from 4 percent in 2025, supported by stronger non-oil activity and continued growth in the oil sector. Growth is expected to remain above 4 percent in 2027 and 2028.

However, the agency warned that persistent inflation, further fuel price increases and security risks could weaken household purchasing power and undermine growth.

Fiscal pressures remain a concern

Despite the improved outlook, weak government revenue and high interest payments remain major constraints.

Fitch expects Nigeria’s general government deficit to widen to 3.6 percent of GDP in 2026, driven by higher spending on security, personnel, social programmes and state governments.

Tax reforms are projected to raise non-oil revenue to 7.5 percent of GDP, equivalent to about 66 percent of government revenue. However, the agency expects implementation constraints to limit gains, leaving revenue below the 19 percent of GDP median for countries in the B rating category.

It also expects the general government interest-to-revenue ratio to average 27 percent between 2026 and 2028, compared with a 14 percent median for similarly rated sovereigns. The federal government’s ratio is expected to remain above 50 percent, limiting fiscal flexibility.

Fitch flagged Nigeria’s $5 billion total return swap facility, of which $1.5 billion has been drawn, as a potential source of contingent liability and liquidity risk, although high reserves and limited disbursement currently mitigate these concerns.

The agency identified sustained disinflation, stronger international reserves and improved domestic non-oil revenue mobilisation as conditions that could support further rating gains.

Oyedele acknowledged that inflation remained high relative to peer countries, government revenue was weak and interest payments consumed a substantial share of revenue.

“These are the constraints the Government’s reform programme is designed to address,” he said.