Market News

By : Isaac Chibuife

S&P Global Ratings has upgraded Nigeria’s long-term sovereign credit rating to ‘B’ from ‘B-’, marking the country’s first ratings upgrade in 14 years and offering the strongest external endorsement of economic reforms introduced by President Bola Ahmed Tinubu since May 2023.

The agency, in its May 15, 2026 assessment, also raised Nigeria’s national scale ratings to ‘ngA+/ngA-1’ from ‘ngBBB+/ngA-2’, while affirming the country’s short-term sovereign ratings at ‘B’ with a stable outlook.

Although Nigeria remains five notches below investment grade, the upgrade signals a reversal from years of downgrades and ratings stagnation that reflected persistent foreign exchange (FX) shortage, weak fiscal buffers and rising debt pressures. The decision has been welcomed by some as evidence that the administration’s market-oriented reforms are beginning to restore macroeconomic credibility.

Critics, however, argued that the gains remain largely abstract for millions of Nigerians who are grappling with high inflation, transport cost crisis and fast declining purchasing power.

A financial markets analyst, Abdulrauf Bello, said the upgrade should be viewed as a macroeconomic milestone rather than an immediate improvement in living conditions. “A credit upgrade essentially signals to the global market that Nigeria is a less risky borrower,” Bello noted in a commentary on X.

“The bread seller in Mushin does not borrow from JP Morgan or from the international debt market. So, the immediate effect on her bottom line is zero.”

His assessment reflects a broader concern over the disconnect between improving macroeconomic indicators and the daily realities facing households.

S&P attributed the upgrade largely to Nigeria’s foreign exchange reforms, particularly the dismantling of the multiple exchange rate regime and the shift towards a more market-driven currency framework.

According to the agency, the reforms have improved transparency in the FX market, strengthened access to hard currency and gradually restored investor confidence.

Nigeria’s external reserves rose to about $50 billion by March 2026, up from roughly $33 billion in 2023. S&P linked the improvement to stronger current account performance, subsidy removal, reduced import pressures and increased domestic refining capacity from the Dangote Petroleum Refinery.

The agency noted that average monthly foreign exchange turnover reached $8.6 billion in 2025, while April 2026 alone recorded approximately $10 billion in FX market supply — levels that suggest significantly improved liquidity compared with conditions prevailing three years ago.

S&P also cited stronger fiscal prospects. Executive Order 9, signed by President Tinubu in February 2026, requires the Nigerian National Petroleum Company Limited to remit a larger share of petroleum revenues directly into the Federation Account.

The ratings agency projects government revenue could rise to 12.4 per cent of GDP in 2026, from 7.3 per cent in 2023.

It further forecast oil production of 1.66 million barrels per day in 2026, a current account surplus equivalent to 5.8 per cent of GDP, inflation moderation to 17.7 per cent from 23 per cent in 2025, and economic growth of 3.7 per cent in 2026 after an estimated four per cent expansion in 2025.

Still, the agency warned that the gains could be reversed if reforms stall, fiscal discipline weakens, or debt servicing pressures intensify.

Analysts like Bello say the impact of a sovereign credit rating upgrade on households is indirect and typically gradual.

The first potential benefit lies in lower borrowing costs for the government. Improved creditworthiness can enable Nigeria to refinance debt more cheaply in international markets, reducing debt service pressures and potentially freeing fiscal resources for infrastructure, power, transport and social investment.

However, he cautions that such gains depend heavily on fiscal discipline and the productive deployment of public funds.

Bello warned that reform gains could easily be undermined if political spending ahead of the 2027 elections weakens fiscal management.

Another route through which the gains are expected to materialise is exchange rate stability. Stronger investor confidence could attract more foreign capital inflows, support the naira and ease imported inflation.

In an import-dependent economy such as Nigeria’s, currency stability directly affects the cost of food, fuel, raw materials and consumer goods, which economists say sustained FX stability could gradually slow price increases and improve purchasing power.

Bello argued that the naira could remain relatively supported if reforms continue and investor confidence holds.

The third channel is through the private sector. A sovereign upgrade lowers the country risk premium attached to Nigerian companies seeking external financing, improving access to cheaper capital for businesses. If sustained, this could support expansion, hiring and investment across sectors of the economy.