Standard & Poor’s (S&P) Global Ratings has revised Nigeria’s outlook from “Stable” to “Positive”, while affirming the country’s sovereign rating at “B-/B”, citing the impact of the government’s ongoing economic reforms.

In a statement on Friday, S&P highlighted that monetary, fiscal, and economic measures implemented by Nigerian authorities are expected to yield significant benefits in the medium term.

Global Ratings Reflect Confidence

Nigeria’s recent performance has attracted attention from major global credit rating agencies. In May, Moody’s upgraded the country’s rating to “B3” from “Caa1”, pointing to improvements in external reserves and fiscal management. Fitch Ratings, meanwhile, maintained Nigeria’s “B” rating with a stable outlook last month.

Economic Reforms Driving Optimism

Since assuming office on May 29, 2023, President Bola Tinubu has pursued bold economic reforms, including removal of the petrol subsidy and liberalisation of currency trading, measures aimed at stimulating growth and attracting foreign investment.

Both the World Bank and the International Monetary Fund (IMF) have indicated that sustained reforms could underpin long-term economic growth and strengthen investor confidence in Nigeria.

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Fitch Ratings has affirmed Nigeria’s long-term foreign-currency issuer default rating (IDR) at ‘B-‘ with a stable outlook. The affirmation reflects the progress made by the administration of President Bola Tinubu in implementing reforms, but also highlights the country’s ongoing economic challenges.

In a statement, Fitch cited the removal of fuel subsidies, the unification of the multiple exchange rate windows, and the devaluation of the naira as positive steps taken by the government. However, the rating agency also noted that there has been some backtracking on reforms recently, and that the country’s rating is constrained by weak governance, structurally very low non-oil revenue, high hydrocarbon dependence, security challenges, high inflation, low net FX reserves, and ongoing weakness in the exchange-rate framework.

Fitch views Tinubu’s cabinet, particularly Finance Minister Wale Edun, and the new CBN governor as supportive of reform. However, it cautioned that there are still sizeable socio-political challenges to implementation.

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The rating agency also flagged a lack of detail on a recent government announcement to raise $10 billion of FX, including whether this includes World Bank budget support loans of $1.5 billion.

Despite these challenges, Fitch forecasts general government debt/GDP to stabilise at 43.9 percent of GDP in 2024-25, and projects GDP to slow to 2.6 percent in 2023, before expanding 3.2 percent in 2024.

The stable outlook reflects Fitch’s expectation that the government will continue to implement reforms and that the economy will gradually recover. However, the outlook could be revised to negative if there is a significant deterioration in the country’s fiscal or external position, or if there is a major social or political upheaval.

About Fitch Ratings

Fitch Ratings is a leading provider of credit ratings, commentary, and research. With dual headquarters in New York and London, Fitch Ratings has a global footprint that encompasses over 30 countries. Fitch’s ratings and research are used by investors, corporations, financial institutions, and governments worldwide to make informed investment and management decisions.

Source: Business Day Newspaper

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