Moody’s changes Nigeria’s outlook to positive, affirms B3 rating

FILE: President Bola Tinubu

Moody’s Ratings has changed Nigeria’s credit outlook from stable to positive while affirming the country’s B3 long-term foreign and local currency issuer ratings.

Positive outlook, the agency said, reflected improvements in Nigeria’s external position and stronger-than-expected economic growth, which, if sustained, could improve the country’s ability to absorb external shocks and strengthen its economic resilience.

It announced the change in a rating action published on its website on Friday.

According to the agency, the improvements were driven by sizeable current account surpluses, increased foreign exchange reserves, improved foreign exchange market functioning and more effective monetary policy transmission.

It added that gradually higher oil production was expected to support economic growth in 2026 and 2027.

“The change in outlook to positive from stable reflects improvements in Nigeria’s external position and stronger-than-expected economic growth, which, if sustained, would enhance the country’s capacity to absorb external shocks, strengthen economic resilience and, over time, support a gradual increase in government revenue,” Moody’s said.

Moody’s is a leading global credit rating firm that independently assesses the creditworthiness of governments and companies to help investors gauge the risk of default.

The agency said Nigeria’s external position had strengthened significantly over the past year, noting that the current account surplus had exceeded its previous expectations.

It forecast Nigeria’s current account surplus to widen to about 6.1 per cent of Gross Domestic Product in 2026 before narrowing to 4.1 per cent in 2027.

Moody’s also said Nigeria’s gross foreign exchange reserves, excluding gold, Special Drawing Rights and the International Monetary Fund position, rose to about 31.2bn a year earlier.

The reserves, it said, now cover about six months of imports.

“Taken together, the large current account surpluses and the reserve accumulation, if maintained, would materially reduce Nigeria’s external vulnerability,” the agency said.

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On economic growth, Moody’s said Nigeria’s real GDP growth reached four per cent in 2025, compared with its previous assessment that medium-term growth would remain closer to three per cent.

It expects growth to remain around four per cent over the next few years, supported by continued strength in the non-oil economy and gradually higher oil production.

Moody’s also said headline inflation declined to 15.4 per cent in July 2026 from 25.3 per cent a year earlier.

It attributed the decline partly to the fading effects of price adjustments that followed exchange rate liberalisation and fuel subsidy removal, as well as the Central Bank of Nigeria’s restrictive monetary policy stance.

The affirmation of the B3 ratings, however, underscores persistent fiscal pressures stemming from still-limited revenue-generation capacity and weak debt affordability, despite a moderate debt burden.

The rating firm noted that general government revenue stood at around 10 per cent of GDP in 2025, among the lowest globally,

The positive outlook follows earlier upgrades in June 2025 when Moody’s raised Nigeria’s long-term issuer ratings to B3 from Caa1 and shifted the outlook to stable from positive.

In May 2026, S&P Global Ratings upgraded Nigeria’s long-term foreign- and local-currency sovereign credit ratings to ‘B’ from ‘B-’, with a stable outlook, pointing to three years of structural reforms, higher oil production and refining capacity, and a stronger balance of payments.

Moody’s said the latest positive outlook could eventually lead to an upgrade if Nigeria sustains recent improvements in its external position, strengthens external resilience and reduces vulnerability to external shocks.

It added that additional revenue measures that increase confidence in sustained growth in government revenue could also support an upgrade.

However, Moody’s warned that the outlook could return to stable if Nigeria’s external buffers deteriorate, external imbalances return or economic growth weakens materially.