Standard & Poor's upgrades Nigeria's sovereign debt outlook due to improved economic performance

Nigeria's global investor confidence has received a significant boost with S&P Global Ratings upgrading the country's sovereign credit rating from 'B-' to 'B', driven by improvements in macroeconomic stability, foreign exchange reforms, and a stronger oil sector performance, as well as the impact of the Dangote Refinery.

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The upgrade, which was announced yesterday, also comes with a stable outlook, indicating the rating agency's confidence in the Federal Government's ability to sustain its ongoing economic reforms, including FX reforms, rising oil output, and stronger reserves.

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S&P's decision to upgrade Nigeria's rating reflects the country's improved external position, characterized by rising foreign exchange reserves, higher oil production, and stronger fiscal revenue generation, all of which have contributed to enhanced macroeconomic stability.

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The agency specifically cited the 2023 exchange rate liberalisation policy and the increased domestic refining capacity led by the Dangote Industries Limited refinery as key factors driving the upgrade, with the policy having bolstered access to foreign currency and enabled a market-driven exchange-rate environment.

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According to S&P, Nigeria's creditworthiness has improved significantly over the past three years, driven by sustained structural reforms, with the most notable being the liberalisation of the exchange rate, which has had a positive impact on the economy.

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Reforms in the oil and fiscal sectors have also been gradually strengthening government finances and reducing debt pressure, with S&P projecting that Nigeria's debt-to-revenue ratio will decline to 338 per cent in 2026 from nearly 500 per cent in 2023.

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The agency expects Nigeria's current account surplus to improve to 5.8 per cent of Gross Domestic Product (GDP) in 2026, up from 4.8 per cent in 2025, supported by higher crude oil prices and growing refined petroleum exports.

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Nigeria's oil production has risen significantly, from 1.38 million barrels per day in 2022 to about 1.65 million barrels per day in 2025, due to improved security in the Niger Delta and reduced crude oil theft, according to S&P.

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The Dangote refinery, which is currently operating near its installed capacity of 650,000 barrels per day, is expected to continue supporting economic growth, foreign exchange earnings, and domestic fuel supply, further driving Nigeria's economic growth.

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Despite the positive outlook, S&P has warned that inflationary pressure, rising fuel prices, and poverty remain major risks to the economy, with the removal of fuel subsidy and rising global crude oil prices pushing up petrol and diesel prices across the country.

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The agency has projected inflation at 17.7 per cent in 2026, but expressed optimism that it would moderate to below 10 per cent by 2028 if current reforms are sustained, while also warning that Nigeria's weak revenue base, high unemployment, and rising poverty levels could undermine reform momentum ahead of the 2027 general elections.

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However, S&P has expressed confidence that continued reforms, improved fiscal discipline, and exchange rate flexibility will strengthen Nigeria's economic resilience and support stronger long-term growth, driven by the impact of FX reforms, rising oil output, stronger reserves, and the Dangote Refinery.