Global rating agency Standard and Poor’s (S&P) has maintained its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on Nigeria. The agency also affirmed its ‘ngBBB+/ngA-2’ long- and short-term Nigeria national scale ratings with a stable outlook. Last August, S&P revised Nigeria’s outlook to stable from negative, acknowledging government reforms that could positively impact growth and fiscal outcomes if effectively implemented.Thank you for reading this post, don't forget to subscribe!
The stable outlook considers the government’s capacity to continue the reform agenda against challenges such as below-potential oil production, macroeconomic stability risks, inflationary pressures, and currency volatility. S&P highlighted that risks to Nigeria’s ability to meet commercial obligations could prompt a downgrade, particularly if foreign currency reserves significantly decrease or fiscal deficits escalate.
Conversely, the agency mentioned a potential upgrade if Nigeria’s economic performance surpasses forecasts, leading to improvements in fiscal and external balances. This reaffirms a positive outlook for the nation despite challenges.
Fitch, another global rating agency, had also affirmed Nigeria’s long-term foreign-currency issuer default rating at ‘B-‘ with a stable outlook in November, crediting ongoing reforms. President Bola Tinubu’s reforms, such as removing the petrol subsidy and lifting currency controls, aim to salvage the country’s economic situation. However, these actions contributed to double-digit inflation, affecting consumers’ purchasing power and raising operating costs for businesses.
S&P acknowledged the significance of the reforms initiated since the Tinubu administration came to power but cautioned about the current challenges, particularly managing inflation and the exchange rate. While expecting reforms to enhance Nigeria’s creditworthiness over the long run, the agency indicated potential growth challenges in 2024 due to tightening monetary and fiscal policies.
The report recognized that Nigeria’s internal security has deteriorated in recent years, citing increased banditry, kidnappings, and general instability. Despite these concerns, the overall security situation is not expected to immediately improve, given persisting economic issues, unemployment, inflation, and rising poverty levels fueling militancy.