MOODY’S SIGNALS GROWING CONFIDENCE IN NIGERIA’S ECONOMIC RECOVERY

Global credit rating agency Moody’s Ratings has changed Nigeria’s sovereign credit outlook from stable to positive, citing stronger economic growth and notable improvements in the country’s external position.

Despite the improved outlook, Moody’s retained Nigeria’s long-term foreign and local currency issuer ratings at B3, indicating that significant fiscal challenges remain.

The rating agency said the shift to a positive outlook reflected Nigeria’s stronger-than-expected economic performance and improvements in its ability to withstand external shocks. It noted that if the progress is sustained, the country’s economic resilience could improve further while government revenue gradually increases.

Moody’s attributed the improvement in Nigeria’s external position to several factors, including sizeable current account surpluses, rising foreign exchange reserves, improved functioning of the foreign exchange market and more effective transmission of monetary policy.

The agency projected that Nigeria’s current account surplus could reach about 6.1 per cent of GDP in 2026, before moderating to approximately 4.1 per cent in 2027.

Nigeria’s gross foreign exchange reserves, excluding gold, Special Drawing Rights and the International Monetary Fund position, were estimated at about $31.2bn, equivalent to roughly six months of import cover.

According to Moody’s, continued reserve accumulation and sizeable current account surpluses could significantly reduce Nigeria’s vulnerability to external economic shocks.

The agency also pointed to the country’s economic growth as another factor behind the improved outlook. Nigeria’s real GDP expanded by 4 per cent in 2025, exceeding Moody’s earlier medium-term growth expectation of about 3 per cent.

Moody’s expects economic growth to remain around 4 per cent in the coming years, supported largely by continued expansion in the non-oil sector and a gradual increase in oil production.

The rating agency also highlighted the decline in Nigeria’s headline inflation, which fell to 15.4 per cent in July 2026, compared with 25.3 per cent a year earlier.

It attributed part of the decline to the fading effects of price adjustments associated with the liberalisation of the foreign exchange market and the removal of fuel subsidies, alongside the Central Bank of Nigeria’s restrictive monetary policy stance.

However, Moody’s warned that Nigeria continues to face serious fiscal constraints. The agency specifically identified the country’s limited revenue-generating capacity and weak debt affordability as factors preventing an immediate improvement in its B3 rating.

The latest outlook change nevertheless represents a positive development for Nigeria, particularly as the government continues to implement economic reforms aimed at improving macroeconomic stability and strengthening investor confidence.

The positive outlook means Moody’s sees potential for further improvement in Nigeria’s credit profile if the current economic gains are sustained and fiscal weaknesses are gradually addressed.

The development could also contribute to improved international investor sentiment as Nigeria seeks to attract more foreign capital and strengthen its position in global financial markets.

However, the retained B3 rating shows that Moody’s remains cautious, with the country still needing to make significant progress in revenue mobilisation, debt affordability and fiscal management before achieving a higher sovereign rating.