Market News

By : Adenike Ibirogba

Nigeria’s latest sovereign ratings upgrade by S&P Global Ratings on Saturday, 16th May, has strengthened the case that the country’s reform programme is gaining external validation, with monetary and foreign exchange reforms emerging as critical components of the macroeconomic credibility now being recognised by global institutions.

S&P upgraded Nigeria’s long-term sovereign credit rating from “B-” to “B”, citing an improving macroeconomic profile. The agency linked the upgrade to stronger economic growth and improved balance-of-payments performance, supported by higher oil production and prices, increased domestic refining capacity, and the exchange-rate liberalisation introduced in 2023. S&P also expects Nigeria’s real GDP per capita to rise by an average of 1.4 percent annually through 2029, reversing the average 1 percent yearly contraction recorded over the past decade.

The latest rating action is not occurring in isolation. It follows a sustained sequence of positive and affirming rating decisions by major global agencies. Fitch upgraded Nigeria to “B” from “B-” in April 2025. Moody’s upgraded Nigeria to “B3” from “Caa1” in May 2025, citing improvements in the country’s external and fiscal positions. S&P revised Nigeria’s outlook to positive in November 2025 before the latest upgrade in May 2026, while Fitch affirmed Nigeria at “B” in April 2026.

Together, these actions point to a broader shift: Nigeria’s reform story is moving beyond domestic policy intent into repeated external validation. For global ratings agencies, the assessment is not based on announcements alone, but on whether reforms are beginning to reflect in external balances, fiscal resilience, reserve strength, market confidence and medium-term growth expectations.

The Central Bank of Nigeria’s role is most visible in the external-sector indicators now supporting Nigeria’s credibility story. The Bank’s foreign exchange reforms, backlog clearance, reserve rebuilding and market-stability measures have helped address some of the key concerns that previously weighed on investor confidence, including limited FX liquidity, uncertainty around access to foreign exchange, weak reserve quality and pressure on external obligations.

One of the strongest proof points is the clearance of the foreign exchange backlog. In January 2025, CBN Governor Olayemi Cardoso announced that the Federal Government had cleared the outstanding $7 billion foreign exchange backlog after a verification exercise by forensic auditors. The backlog had been one of the major pressure points affecting investor confidence because it raised concerns about whether foreign investors and businesses could access dollars to repatriate funds, settle obligations and plan long-term transactions.

Nigeria’s reserve position has also strengthened significantly. Net foreign-exchange reserves rose to $34.8 billion at the end of 2025, up from $3.99 billion two years earlier. Gross reserves also rose from $40.19 billion to $45.71 billion over the previous year and climbed further to $50.45 billion by mid-February 2026, according to the CBN. The Bank attributed the improvement to stronger external fundamentals, improved transparency, better reserve management, increased FX inflows and reforms aimed at restoring confidence in the currency market.

Nigeria’s balance-of-payments position has also turned around. In 2024, the country recorded a $6.83 billion balance-of-payments surplus, reversing deficits of $3.34 billion in 2023 and $3.32 billion in 2022. The current and capital accounts posted a $17.22 billion surplus, supported by a $13.17 billion goods trade surplus, while portfolio investment inflows more than doubled to $13.35 billion. Foreign exchange reserves also rose by $6 billion to $40.19 billion by the end of 2024.

These indicators are important because sovereign ratings are heavily influenced by a country’s ability to meet external obligations, attract capital, manage shocks and sustain confidence in its policy direction. The CBN’s reforms do not stand apart from the wider reform programme; they provide part of the monetary and external-sector foundation that allows the broader reform story to become credible to investors, lenders and ratings agencies.

The S&P upgrade therefore places renewed attention on the link between FX reform and external confidence. S&P cited exchange-rate liberalisation as one of the factors supporting stronger growth and improved balance-of-payments performance. Moody’s had earlier made a similar connection in its May 2025 upgrade, noting that improvements in foreign exchange management helped improve Nigeria’s balance of payments and strengthen the Central Bank’s foreign exchange reserves.

According to S&P, Nigeria’s improved credit profile also reflects eflects broader structural shifts, including expanding domestic refining capacity, which has supported stronger growth and improved balance-of-payments performance. The agency also highlighted Nigeria’s position as a sizable net crude oil exporter and an emerging producer of refined fuels, making the country less exposed to some regional spillover risks than many peers.

The latest S&P decision also reinforces the importance of coordinated reform. Nigeria’s improving ratings profile is not the product of one institution alone. It reflects the combined effect of monetary policy, fiscal reforms, exchange-rate adjustment, real-sector developments, oil production recovery, domestic refining capacity and efforts to strengthen the country’s external position.

Still, the CBN remains a critical credibility anchor within that wider reform ecosystem. Foreign exchange reforms, reserve rebuilding, backlog clearance, improved liquidity and market-confidence restoration are central to how Nigeria’s macroeconomic credibility is being rebuilt. They are also central to how investors interpret the country’s future outlook.

For investors, the significance of repeated ratings recognition is that Nigeria’s risk story is being reassessed. A better rating can improve how global investors evaluate a country’s risk, influence sentiment around capital flows, and support a more constructive view of the country’s ability to meet its obligations over time. It does not automatically remove inflationary pressure or immediately translate into lower prices for households, but it can strengthen the confidence base required for investment, stability and growth.

The challenge ahead is to continuously convert external validation into deeper confidence among domestic and international audiences. For businesses and investors, the ratings signals that Nigeria’s reform direction is becoming more credible. For citizens, the gains will depend on how quickly macroeconomic stability feeds into lower inflationary pressure, improved investment, stronger job creation and broader economic resilience.

Nigeria’s latest S&P upgrade is therefore more than a ratings headline. It is part of a wider pattern of recognition from Fitch, Moody’s and S&P that the country’s economic reforms are beginning to register externally. The task now is to sustain policy discipline, deepen market confidence and ensure that the credibility being recognised globally translates into stronger outcomes at home.