S&P upgrades Nigeria’s sovereign rating to B from B-, citing stronger oil output and FX reforms

Nigeria’s economic outlook received a significant lift after S&P Global Ratings announced on May 15 that it had upgraded the country’s credit rating from B- to B, citing improving macroeconomic conditions and economic reforms.

According to the ratings agency, stronger oil production, improvements in domestic refining capacity, and the decision to float the naira in 2023 have all contributed to bettering the country’s economic position.

Nigeria’s credit improvement

The S&P Global announcement mentioned that the main drivers for this upgrade were the Sub-Saharan countries’ rising crude oil production, higher oil prices, and an increase in their refining capacity. The decision to unpeg the country’s exchange rate made in 2023, ending decades of carefully managed currency pegs, was also mentioned as an important factor.

“We expect Nigeria’s real GDP per capita to rise 1.4% on average per year until 2029, a significant improvement on the 1% yearly contraction, on average, over the past decade,” S&P said in its statement.

S&P Global Ratings also noted that Nigeria is less exposed to the adverse economic effects of the conflict in the Middle East than many other countries in Sub-Saharan Africa, mainly because of its position as a major crude oil exporter.

According to the agency, higher global oil prices due to geopolitical tensions could provide additional support for Nigeria’s export earnings and foreign exchange inflows. This would help to cushion the economy against some of the external pressures affecting other regional markets.

US-Iran war and its inflation consequences

Nigeria had shown signs of reducing the pressure of inflation before the tensions involving the United States, Israel, and Iran disrupted global energy markets and caused surges in oil prices.

According to Reuters, consumer prices had declined for 11 consecutive months prior to the recent increase recorded in March. However, the geopolitical conflict contributed to a sharp rise in fuel prices, which then trickled into transportation and food costs across the country.

As a result, Nigeria’s consumer inflation rate increased for a second consecutive month in April.

The World Bank said in April that it expects Nigeria’s economy to grow by about 4.2% in 2026 even as the war rages on in the Middle East. The institution urged Nigerian authorities to save its windfalls from elevated oil prices and maintain a smart monetary policy to contain inflation.

S&P’s decision comes after similar rating upgrades by Fitch and Moody’s, two other major credit rating agencies. Both upgraded Nigeria’s rating over the past year, each citing improvements in the country’s fiscal outlook and economical position.

The rating upgrades signal a shift in how global credit markets are beginning to view Nigeria after years of economic instability marked by currency controls, challenges surrounding fuel subsidy reforms, and declining per-capita income.

Analysts say the improved outlook reflects growing confidence in the government’s recent economic reforms, particularly efforts to liberalize the foreign exchange market and restructure long-standing subsidy programs that had weighed heavily on public finances.

While significant challenges remain, the upgrades suggest international bodies and agencies are becoming more optimistic about Nigeria’s medium-term economic trajectory.