Moody’s Changes Nigeria’s Credit Rating Outlook to Positive
Moody’s Ratings has changed the outlook on the Government of Nigeria to positive from stable and confirmed the B3 long-term foreign currency and local currency issuer ratings, the B3 senior unsecured ratings, and the (P)B3 senior unsecured MTN programme rating.
In its rating note, Moody’s said the change in outlook to positive from stable reflects improvements in Nigeria’s external position and stronger-than-expected economic growth.
Ratings analysts said that, if sustained, these improvements would enhance the country’s capacity to absorb external shocks, strengthen economic resilience and, over time, support a gradual increase in government revenue.
These improvements reflect sizeable current account surpluses, a significant accumulation of external reserves, improved foreign exchange market functioning and more effective, albeit still weak, monetary policy transmission, which together have contributed to greater macroeconomic stability and strengthened external resilience.
While the non-oil economy has been the main driver of growth, gradually higher oil production should add to growth in 2026 and 2027.
The ratings affirmation at B3 reflects fiscal pressures stemming from still-limited revenue-generation capacity and weak debt affordability, despite a moderate debt burden. While progress has been made, the weak institutional and governance framework further constrains credit strength.
These challenges are balanced by the country’s large and diversified economy, underpinned by strong domestic demand potential, and more robust external buffers built over recent years following the overhaul of foreign-exchange management.
Nigeria’s local currency (LC) and foreign currency (FC) country ceilings remain Ba3 and B2, respectively. The LC country ceiling at Ba3 is three notches above the sovereign issuer rating, incorporating, albeit to a reduced degree, some unpredictability in government actions and political risk.
The FC country ceiling at B2 remains two notches below the LC country ceiling, reflecting persistent risks of transfer and convertibility.
Nigeria’s external metrics have strengthened materially over the past year. The current account surplus has exceeded Moody’s expectations at the time of the May 2025 rating upgrade.
“While higher-than-expected oil prices and the ramp-up in refined petroleum product exports have contributed to the increase in the surplus, we expect it to remain sizeable even under materially lower oil prices”.
Oil production has recovered gradually since late 2025, and ratings analysts expect it to increase further over the coming years. As a result, Moody’s forecasted the current account surplus to widen to around 6.1% of GDP in 2026 before narrowing to 4.1% in 2027.
The strong current account surplus, alongside sustained remittance inflows and strong, albeit moderating, portfolio inflows, has facilitated a significant accumulation of foreign exchange reserves.
Gross foreign exchange reserves, excluding gold, Special Drawing Rights, and the position at the IMF, increased to around $44.4 billion in June 2026 from $31.2 billion a year earlier, now covering around six months of imports and exceeding our expectations.
Taken together, the large current account surpluses and the reserve accumulation, if maintained, would materially reduce Nigeria’s external vulnerability.
Nigeria nevertheless remains exposed to shifts in global investor demand because non-resident portfolio inflows have become an important source of both foreign currency and domestic-market financing.
Macroeconomic performance has also been stronger than expected at the time of the previous rating action. Real GDP growth reached 4.0% in 2025, compared with our previous assessment that medium-term growth would remain closer to 3%.
Growth has been driven primarily by robust non-oil activity, reflecting improved foreign exchange availability and reduced distortions in the foreign exchange market.
“We expect growth to remain around 4% over the next few years, supported by continued strength in the non-oil economy and gradually higher oil production”.
Macroeconomic stabilisation has also strengthened the operating environment. Headline inflation declined to 15.4% in July 2026 from 25.3% a year earlier, reflecting the fading effects of the sharp price hikes, the removal of fuel subsidies, and exchange rate liberalisation.
It also reflects the Central Bank of Nigeria’s restrictive monetary policy stance, following the overhaul of its governance framework and the transition towards an inflation-targeting approach, which is enhancing monetary policy transmission and points to gradual improvements in the effectiveness of Nigeria’s monetary policy framework.
The naira has appreciated against the US dollar during 2025-26, while declining inflation has reinforced macroeconomic stability. Ratings analysts expect inflation to continue to decline over time, notwithstanding risks from food prices, exchange rate movements, and external commodity price shocks.
Together, lower inflation and a more stable macroeconomic environment increase the potential for stronger economic activity and higher government revenue generation over time.
The affirmation of Nigeria’s B3 ratings reflects the country’s persistently weak fiscal position, driven primarily by exceptionally low government revenue, despite some recent progress in tax administration and reform.
The rating note highlighted that general government revenue amounted to around 10% of GDP in 2025, among the lowest levels globally and well below those of rating peers.
Moody’s said revenue mobilisation continues to be constrained by a large informal economy, extensive exemptions, weak compliance, leakages in the collection and remittance of oil-related revenue, and limited administrative capacity across different levels of government.
While the tax reforms enacted in 2025 strengthen the framework for revenue mobilisation over time, ratings analysts expect their fiscal impact to materialise only gradually and remain subject to implementation risks.
Weak revenue generation continues to weigh heavily on debt affordability and fiscal flexibility.
Although the government’s debt stock remains moderate relative to GDP, exceptionally low revenue and high domestic borrowing costs result in a very large interest burden relative to government income.
“We expect debt affordability to remain weak over the coming years, with interest payments continuing to absorb a substantial share of revenue absent significantly stronger revenue mobilisation”.
Weaknesses in public finance management also remain a credit constraint, reflecting shortcomings in fiscal reporting, expenditure control, and budget execution, Moody’s said.
