S&P Revises Nigeria’s Outlook to Positive, Affirms ‘B-/B’ Ratings

S&P Global Ratings revised its outlook on Nigeria to “positive” from “stable” on Friday, backing the ongoing economic reforms. It also affirmed the country’s rating at “B-/B”.

According to the rating note, the positive outlook reflects the country’s improving external, economic, fiscal, and monetary results.

Despite low GDP per capita, a weak, albeit improving, fiscal revenue base, high debt servicing costs as a percentage of revenues, and challenges in compiling national statistics, analysts think authorities are taking steps to improve the economy’s growth prospects, and macroeconomic resilience.

“In our view, the monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term.

“The growth outlook is improving, for both the hydrocarbon and nonhydrocarbon sectors.

“We have revised our outlook on Nigeria to positive from stable, based on the potential for continued gains, particularly in our external and monetary analysis.

 “We also affirmed our ‘B-/B’ sovereign credit ratings on Nigeria,” S&P said in a statement. It also affirmed that the ongoing economic reform policies being put in place by the current administration will eventually yield positive outcomes.

“The monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term.”

In 2023, President Bola Tinubu launched the boldest reforms in decades, scrapping the costly petrol subsidy and removing currency trading restrictions to spur growth and attract foreign investment.

Analysts have said that, if sustained, these reforms could support long-term economic expansion, though implementation hurdles and global oil price volatility still pose risks.

In May, Moody’s upgraded Nigeria’s rating by one notch to “B3” from “Caa1”, citing notable improvements in the country’s external and fiscal positions, while Fitch last month kept its “B” rating and “stable” outlook.

To bridge fiscal gaps, Nigeria has turned to debt markets. Last week, the country raised $2.35 billion through a Eurobond issuance to help finance its 2025 budget deficit, while continuing to borrow domestically.

Explaining the rating rationale, S&P stated that Nigeria’s Broad-based structural indicators are starting to improve following reform momentum that has been maintained since mid-2023.  The reforms were initiated in mid-2023 following the election of President Bola Tinubu’s administration.

Since then, a concerted reform drive encompassing the liberalization of the exchange rate regime, significant fiscal consolidation measures (notably the removal of fuel subsidies, and enhanced revenue collection), increased oil production, and the commissioning of the substantial new Dangote refinery have placed external, fiscal, economic, and monetary indicators on a more positive trajectory.

While key weaknesses and risks persist, rating analysts anticipate the positive trend in related indicators will continue, albeit more slowly.

“Our growth expectations have strengthened to an average of 3.7% over 2025-2028 (from 3.2% before) following expected higher oil production and improving private sector confidence. We expect inflation to gradually decrease toward 13% in 2028”.

S&P said more marked improvements in the government’s financing capacity could develop. Ratings analysts’ estimates of Nigeria’s external position have strengthened on the back of stronger current account surplus expectations and associated reserve accumulation, which on a gross basis are estimated at just under $44 billion in October 2025.

“We expect the government’s fiscal efficiency and revenue drive will continue, with a raft of reforms underway or due to be implemented by early 2026.

“These include organizational clarifications of tax-related powers for each revenue collecting entity under the Nigeria Revenue Service Establishment Act and Joint Revenue Board Establishment Act, and clarifications over its administration and collection as part of the Nigerian Tax and Tax Administration Acts.

“We expect these measures to improve tax compliance and rationalize existing incentives, improving fiscal outcomes. This, in addition to increased oil production, should help contain government debt levels, assuming the commitment to controlled expenditure-side measures continue as well.

“We anticipate that election-related expenditure will increase in the run up to the 2027 elections, but do not expect these to cause a prolonged material deviation in fiscal results; we forecast a general government deficit averaging 3.2% of GDP over 2025-2028”.

Together, these factors should help reduce still-very high debt service costs and help improve the government’s liquidity position, S&P said in the rating note.

Ratings analysts said increased confidence in the market-driven stability of the naira is a positive factor in their analysis.

“A willing-buyer, willing-seller model has been established and differentials between official and unofficial rates are very limited.

“Improved confidence in the country’s foreign exchange (FX) arrangements and removal of FX backlogs have helped attract remittances from the country’s large diaspora, which could be further supported by the country’s recent removal from the Financial Action Task Force grey list.

“This has also been a factor in attracting significant external funding, which has bolstered foreign reserves. However, we understand nonresidents now hold about 25% of local currency debt, much of which is visible in large portfolio inflows”.

S&P noted that a material outflow (of $4 billion) is visible in first-quarter data, which analysts associate with U.S. tariff announcements; while growing foreign exchange reserves, a stable exchange rate and high real returns will remain attractive factors for related funding, portfolio funding could be vulnerable to external shocks.

“While we do not expect recent U.S. designation of Nigeria as a country of particular concern to materially impair its economic prospects, it raises uncertainty and could weaken confidence”, S&P said. 

Analysts said large election-related fiscal deviations could also be disruptive. Key weaknesses and vulnerabilities will only gradually reduce. We expect fundamentals to strengthen, albeit from a low base.

“Where Nigeria’s large informal economy likely provides significant additional resilience to shocks–and has been supportive through a period of very high inflation–GDP per capita estimates are very low, at about $1,200.

“Poverty levels are high, and the effects of inflation, along with the removal of fuel subsidies, are tangible among large portions of the economy.

“Associated dissatisfaction could pose implementation risks. Fiscal revenue remains among the lowest of rated sovereigns and debt servicing costs very high”.

S&P said Nigeria’s fiscal and external data provision is weak, which complicates ratings agency’s analysis of both.

“We also recently lowered our oil price assumptions for 2026 to $60 per barrel (/bbl) from $65/bbl, which will weigh on fiscal and external revenue”.

Nigeria is the most populous country and third-largest economy among rated sovereigns in Africa. It is also a sizable producer and exporter of hydrocarbons, ranking among the world’s top 15 exporters.

Oil accounts for just 5% of GDP but has contributed over one-third of fiscal revenue and nearly 90% of export receipts over the past few years.

Still, most Nigerians work in the non-oil economy, with just below half of the labor force employed in relatively low-productivity agriculture, which accounts for an estimated quarter of total economic output.

According to IMF data, only about 10% of Nigerian workers engage in wage employment, primarily in the public sector. While the high level of informality forms an obstacle to increasing tax collection, we also consider it likely provides an element of resilience not captured by the low level of dollar-denominated GDP per capita.

Evidence of this, according to S&P is visible in stronger non-oil growth, despite inflation averaging above 25% over 2023 to 2025.

Recently rebased GDP–which boosted headline figures by 35%–indicates a larger and more diversified economy than many regional peers. Still, according to the World Bank, poverty rates have increased over this period, which could imply weaker capacity to buffer future shocks.

Efforts to combat militancy and theft are likely to lead to increasing hydrocarbon production. Nigeria has struggled to maintain production levels over the past several years.

However, efforts against militancy and theft appear to have yielded results, with Nigerian National Petroleum Corp. (NNPC) production rising to an average of 1.60 million barrels per day (mbpd; including associated condensate) from 1.38 mbpd in 2022.

“We expect further investments from the new owners of fields–including those not owned by NNPC–along with a continued effort to contain losses and theft, to increase production through 2027”.

Substantial additional refining activity has also come online, as the new large refinery (and petrochemicals facility) owned by the private-sector Dangote group has started production and will increase output toward its 650 million barrel maximum annual capacity.

In addition, other refineries, such as at Port Harcourt, Warri, and Kaduna, are being rehabilitated, which should significantly contribute to Nigeria’s overall refining capacity in the next few years.

The additional capacity will benefit the economy, with potentially a further net positive impact on the country’s balance of payments.

Ratings analysts now expect Nigeria’s real GDP growth to average 3.7% (from 3.2% previously) over 2025-2028, through both the non-oil and oil sector.

Initial second-quarter 2025 growth estimates stand at 4.2%, driven predominantly by the oil sector. As inflation gradually declines and monetary policy loosens, analysts expect consumption to contribute most to growth, although we still expect per capita GDP will remain low, also reflecting the country’s high population growth.

To note, high-frequency indicators have improved in second-half 2025, in particular services and agriculture, indicating improved confidence. While reforms will likely increase growth in the later years of our forecast period, for 2025 and 2026, a still-tight monetary policy and further revenue-raising reforms will likely contain the expansion.

“We expect Nigeria’s current account will maintain a stronger surplus position, and that reserves will accumulate.  Multiple factors explain the significant improvement in the 2024 current account surplus, to nearly 7% of GDP from 1.6% in 2023”, ratings analysts stated.

Following the liberalization of the FX market in mid-2023, a “willing buyer-willing seller” model has been established. This led to a significant depreciation of the currency, which stood at Nigerian naira (NGN) 1,450 per U.S. dollar in November 2025, from about NGN460 pre-liberalization in May 2023.

Still, ratings analysts expect real credit growth will remain muted and overall credit to the private sector will remain below 30% of nominal GDP Remaining valid FX backlogs have been cleared and market liquidity and clearing have improved.

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