Global credit ratings agency Moody’s has upgraded Nigeria’s long-term foreign currency rating from Caa1 to B3, citing meaningful improvements in the country’s external and fiscal positions following key macroeconomic reforms introduced under President Tinubu’s administration.
The outlook has been adjusted from “positive” to “stable,” signaling renewed global confidence in Nigeria’s economic direction but also a cautious view on the pace of progress ahead.
The upgrade, announced late Thursday, follows similar sentiment expressed by Fitch Ratings in April, which moved Nigeria’s outlook from “negative” to “stable.” Both agencies point to recent fiscal discipline and overhauls in foreign exchange management as pivotal to Nigeria’s improved credit standing.
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“The recent overhaul of Nigeria’s foreign exchange management framework has markedly improved the balance of payments and bolstered the CBN’s foreign exchange reserves,” Moody’s noted in its statement.
The Central Bank of Nigeria (CBN) introduced sweeping changes in 2024, including a new FX matching platform and FX code to facilitate price discovery and reduce volatility in the official exchange window. This came after a 40 percent depreciation of the naira in 2023, which sparked fears of an unstable macroeconomic environment. However, the reforms have significantly narrowed the gap between the official and parallel market rates and restored investor confidence in FX liquidity.
Although the rating has improved, Moody’s revised the outlook to “stable” from “positive,” reflecting concerns that the current momentum might not be sustained at the same pace — especially if global oil prices, a key revenue source for Nigeria, decline sharply.
“The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely,” the agency said.
Moody’s also emphasized that continued success will depend on Nigeria’s ability to sustain gains made so far and protect its fiscal discipline against political and global market headwinds.
Key Drivers Behind the Upgrade
A combination of inflation control, better fiscal management, and improved investor sentiment has helped shift the narrative around Africa’s largest economy. Moody’s cited Nigeria’s steps to stabilize borrowing costs and reduce inflationary risks — despite the economic hardship caused by earlier reforms such as fuel subsidy removal and deficit monetization.
This sentiment echoes Fitch’s earlier report that praised the Tinubu administration’s market-oriented approach. Reforms such as exchange rate liberalization, tighter monetary policy, and the halting of central bank financing of budget deficits have been credited for reducing economic distortions and enhancing the country’s resilience to external shocks.
“We are seeing clear signs of increased commitment to market-based reforms under President Tinubu’s administration,” Fitch noted in April. “While challenges remain, Nigeria’s trajectory has shifted toward stability and greater investor confidence.”
The World Bank has also taken note of Nigeria’s rebound, reporting that the country posted its fastest growth in nearly a decade in 2024. The acceleration was driven by a strong fourth-quarter economic expansion, underpinned by improved oil production, stronger fiscal management, and greater policy transparency.
Inflation Still a Major Risk
Despite the positive outlook, analysts warn that inflation remains a serious concern. Food prices continue to soar and wage growth has not kept up, threatening to undo recent gains if not addressed with targeted and sustained policy interventions. The CBN is under pressure to balance interest rates with measures that promote real sector growth without reigniting inflationary pressures.