Flag of Nigeria
Rating agency says Tinubu-era policies boosting growth prospects, stability, and investor confidence..
S&P Global Ratings has revised Nigeria’s sovereign credit outlook from stable to positive, reflecting renewed confidence in the country’s reform trajectory and strengthening macroeconomic indicators.
In its latest assessment, the agency affirmed Nigeria’s long- and short-term foreign and local currency ratings at ‘B-/B’, along with national scale ratings of ‘ngBBB+/ngA-2’.
S&P said the revised outlook “reflects improving external, economic, fiscal, and monetary results,” even as the country continues to face deep-rooted challenges including low GDP per capita, elevated debt-servicing costs, and weak statistical systems.
Reforms driving stability
The positive shift follows a broad set of policy reforms rolled out since mid-2023 under President Bola Tinubu, including foreign exchange liberalisation, fuel subsidy removal, revenue mobilisation efforts, and higher oil production supported by the operationalisation of the Dangote Refinery.
According to S&P, these reforms have helped place Nigeria on a more stable fiscal and monetary footing.
“We think authorities are taking steps to improve the economy’s growth prospects and macroeconomic resilience,” the agency said.
Growth outlook strengthens
S&P also revised upward its medium-term growth projection for Nigeria, forecasting average growth of 3.7% between 2025 and 2028, compared with its earlier estimate of 3.2%. The agency expects higher oil output and improved private sector sentiment to underpin the expansion.
Inflation is projected to ease gradually, reaching 13% by 2028, though it is expected to remain above 20% through 2025 and 2026.
Nigeria’s external buffers have also improved. As of October 2025, gross reserves were estimated at just under $44 billion. The country’s removal from the FATF grey list, coupled with a more stable naira regime, has helped attract increased diaspora remittances and foreign portfolio inflows.
Risks could still reverse progress
Despite the optimism, S&P warned that setbacks could prompt a return to a stable outlook.
“We could revise the outlook to stable if risks to Nigeria’s reform program implementation rise or if capacity to repay commercial obligations weakens,” the agency cautioned.
Potential risks include widening fiscal deficits, rising debt service, or sudden capital outflows. On the other hand, an upgrade is possible within 12 months if fiscal gains deepen and economic performance outpaces expectations.
Fiscal reforms and oil sector recovery support confidence
S&P highlighted that Nigeria’s fiscal reforms including the implementation of the Nigeria Revenue Service Establishment Act and accompanying Tax Administration Acts are expected to streamline tax responsibilities, reduce overlaps, and improve compliance.
The rating agency forecasts a general government deficit averaging 3.2% of GDP from 2025 to 2028. It noted that the 2027 election cycle is not expected to trigger major fiscal slippages. Although debt-service costs remain heavy, better liquidity conditions and controlled spending could ease pressure.
In the oil sector, production has climbed to 1.60 million barrels per day from 1.38 mbpd in 2022, partly due to improved security and reduced crude theft. The Dangote refinery is expected to gradually scale up toward its annual refining capacity of 650 million barrels, while ongoing rehabilitation of the Port Harcourt, Warri, and Kaduna refineries is expected to boost local processing capacity.
Together with stronger non-oil growth and rebased GDP figures, S&P says Nigeria is moving toward a more diversified and resilient economic structure.
Structural challenges still weigh
S&P noted that Nigeria continues to struggle with structural weaknesses, including a low GDP per capita of roughly $1,200, widespread poverty, and data quality gaps that complicate economic analysis. The large informal sector, while cushioning economic shocks, also limits tax mobilisation.
The agency expects the Tinubu administration to maintain its reform agenda but warns that momentum may slow as the 2027 elections approach.
“Improved confidence and oil production gains should support average growth of 3.7% over 2025–2028,” S&P concluded.
Background
In August 2023, S&P upgraded Nigeria’s outlook from negative to stable after a period of fiscal strain and declining forex inflows. Prior to that, in May 2023, the agency maintained the country’s B-/B rating but shifted the outlook to negative amid rising debt pressures and constrained revenue.
According to data from the Central Bank of Nigeria, the country’s fiscal deficit stood at N4.0 trillion in Q1 2023.
About the Author
