Moody’s shifts Nigeria’s outlook to positive, retains B3 rating

Global credit rating agency Moody’s Ratings has revised Nigeria’s sovereign credit outlook from “stable” to “positive”, citing improvements in the country’s external position and stronger-than-expected economic growth.

Despite the improved outlook, Moody’s retained Nigeria’s long-term foreign and local currency issuer ratings at B3.

The agency announced the decision in a rating action published on Friday, noting that Nigeria’s growing external buffers and improving economic performance had strengthened its ability to withstand potential external shocks.

According to Moody’s, the positive outlook reflects the possibility that the recent improvements, if sustained, could enhance Nigeria’s economic resilience and gradually support stronger government revenue.

Stronger external position

A major factor behind the change in outlook is the significant improvement in Nigeria’s external position.

Moody’s pointed to sizeable current account surpluses, increased foreign exchange reserves, improved functioning of the foreign exchange market and better transmission of monetary policy.

The agency expects Nigeria’s current account surplus to rise to about 6.1 per cent of Gross Domestic Product in 2026 before moderating to approximately 4.1 per cent in 2027.

Foreign exchange reserves have also increased significantly. Moody’s reported that gross reserves, excluding gold, Special Drawing Rights and Nigeria’s position at the International Monetary Fund, had risen substantially over the past year.

The stronger external buffers, according to the rating agency, should reduce the country’s vulnerability to external shocks, particularly those arising from movements in global oil prices and financial markets.

Economic growth exceeds expectations

Moody’s also highlighted Nigeria’s stronger economic performance as a reason for the improved outlook.

The agency said real GDP growth reached about four per cent in 2025, exceeding its previous expectation that medium-term growth would remain closer to three per cent.

It expects economic growth to remain around four per cent over the coming years, supported by continued expansion in the non-oil economy and a gradual increase in oil production.

The agency also noted the recent moderation in inflation. Headline inflation fell to 15.4 per cent in July 2026, compared with 25.3 per cent a year earlier.

The decline reflects, among other factors, the fading impact of the price adjustments that followed the liberalisation of the foreign exchange market and removal of fuel subsidies, alongside the Central Bank of Nigeria’s restrictive monetary policy stance.

B3 rating remains unchanged

While Moody’s improved Nigeria’s outlook, it stopped short of upgrading the country’s actual credit rating.

The B3 rating continues to reflect concerns over Nigeria’s fiscal position, particularly the government’s limited revenue-generating capacity and weak debt affordability.

Moody’s noted that general government revenue remained around 10 per cent of GDP in 2025, placing Nigeria among countries with comparatively low government revenue levels globally.

This means that although Nigeria’s external position and economic growth have improved, significant structural fiscal challenges remain.

The agency’s decision therefore signals increased confidence in the direction of the economy without suggesting that Nigeria has fully overcome its fiscal vulnerabilities.

Positive outlook could lead to upgrade

The shift to a positive outlook means Nigeria could be considered for a rating upgrade if the improvements identified by Moody’s are sustained.

The agency said continued strengthening of the country’s external position, improved resilience to external shocks and reduced economic vulnerabilities could support an eventual upgrade.

Additional measures capable of improving government revenue and strengthening confidence in the sustainability of economic growth could also improve Nigeria’s credit profile.

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

Follows positive assessments from other agencies

Moody’s latest decision adds to a series of more positive assessments of Nigeria by international credit rating agencies.

In May 2026, S&P Global Ratings upgraded Nigeria’s long-term foreign and local currency sovereign ratings to B from B-, with a stable outlook.

S&P cited sustained structural reforms, increased oil production, higher refining capacity and improvements in Nigeria’s balance of payments.

Fitch Ratings had also maintained Nigeria’s B rating with a stable outlook in April.

The latest Moody’s decision therefore provides another indication that international rating agencies are beginning to recognise improvements in Nigeria’s macroeconomic and external position.

For the Federal Government, the positive outlook represents an important development as it seeks to attract investment, strengthen investor confidence and demonstrate the impact of its economic reform programme.

However, the retention of the B3 rating also highlights the need for continued reforms, particularly in boosting government revenue, improving debt affordability and strengthening the country’s fiscal position.