Moody’s changes Nigeria’s outlook to positive, affirms B3 rating

Moody's Ratings has upgraded Nigeria's credit outlook to positive and maintained its B3 long-term foreign and local currency issuer ratings, according to the agency's latest rating action. This change is attributed to improvements in Nigeria's external position and stronger-than-expected economic growth, which could enhance the country's ability to withstand external shocks and bolster economic resilience.

The agency highlighted sizeable current account surpluses, increased foreign exchange reserves, improved functioning of the foreign exchange market, and effective monetary policy transmission as key drivers of these improvements. Additionally, the gradual rise in oil production is expected to contribute to sustained economic growth in 2026 and 2027.

Moody's emphasized that the positive outlook reflects Nigeria's strengthened external position and better-than-anticipated economic growth, which, if maintained, would enhance the country's capacity to absorb external shocks, strengthen economic resilience, and gradually increase government revenue over time. The agency projected Nigeria's current account surplus to reach about 6.1% of Gross Domestic Product in 2026, before narrowing to 4.1% in 2027.

Furthermore, Nigeria's gross foreign exchange reserves, excluding gold, Special Drawing Rights, and the International Monetary Fund position, have risen to about 31.2 billion, covering approximately six months of imports. These factors collectively reduce Nigeria's external vulnerability, according to Moody's.

The rating action also noted that Nigeria's real GDP growth reached 4% in 2025, surpassing the previous estimate of a medium-term growth rate of around 3%. The agency expects this growth to remain around 4% over the next few years, buoyed by the strength of the non-oil economy and steadily increasing oil production.

Inflation has declined to 15.4% in July 2026 from 25.3% a year earlier, attributed to the fading effects of price adjustments following the exchange rate liberalization and fuel subsidy removal, as well as the Central Bank of Nigeria's restrictive monetary policy stance.

However, the affirmation of the B3 ratings also underscores persistent fiscal pressures due to limited revenue-generation capacity and weak debt affordability, despite a moderate debt burden. Government revenue in 2025 stood at around 10% of GDP, one of the lowest globally.

Moody's previously upgraded Nigeria's long-term issuer ratings to B3 from Caa1 in June 2025 and shifted the outlook to stable from positive. If Nigeria sustains recent improvements in its external position, strengthens external resilience, and reduces vulnerability to external shocks, the positive outlook could lead to an upgrade. The agency also noted that additional revenue measures that boost confidence in sustained government revenue growth could further support an upgrade.