In a significant vote of confidence, global credit ratings giant Moody’s has upgraded Nigeria’s sovereign credit rating from Caa1 to B3, citing substantial progress in fiscal discipline, external balance, and foreign exchange stability. The move marks a rare positive shift for one of Africa’s largest economies.
The upgrade, announced on Friday, moves Nigeria from Moody’s “substantial risk” category to the less severe “highly speculative” band—still below investment grade, but a clear sign that global investors are recognizing President Bola Tinubu’s economic reforms. Moody’s also revised the country’s outlook from “positive” to “stable,” reflecting expectations that recent improvements will hold, unless there is a sharp drop in oil prices.
Reform Agenda Reshaping Economy
At the heart of Nigeria’s improving outlook is Tinubu’s bold economic reform programme, which includes the removal of costly fuel subsidies, a major restructuring of electricity sector spending, and two significant devaluations of the naira to create a more market-reflective exchange rate.
These moves have not come without pain—consumer prices have surged, putting pressure on households—but the reforms have yielded tangible macroeconomic benefits. The World Bank reports that foreign reserves have rebounded above $37 billion, offering a crucial buffer against external shocks. “The recent overhaul of Nigeria’s foreign exchange framework has markedly improved the balance of payments and bolstered the Central Bank’s foreign exchange reserves,” Moody’s said in its statement.
Strong Growth, but Inflation Still a Threat
Earlier this month, the World Bank confirmed that Nigeria’s economy grew at its fastest pace in a decade in 2024, clocking 4.6% year-on-year growth in Q4, with full-year growth projected at 3.6% for 2025.
However, the Bank also sounded a cautionary note: persistently high inflation remains a major risk to macroeconomic stability. Reforms, while necessary, have pushed up prices. As a result, the World Bank stressed the need for tight monetary policy and continued fiscal discipline. “Inflationary risks, though still present, are beginning to ease,” Moody’s added, pointing to lower domestic borrowing costs and early signs of price stabilization.
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Fiscal Gains and Budget Discipline
In fiscal terms, Nigeria’s revenue performance has improved significantly. According to World Bank lead economist Alex Sienaert, government revenue rose by 4.5% of GDP in 2024, driven by the end of foreign exchange subsidies, better tax administration, and rising remittances. This revenue boost enabled Nigeria to cut its fiscal deficit from 5.4% of GDP in 2023 to an estimated 3% in 2024—a major shift toward sustainable public finance. Sienaert called the improvement a “remarkable achievement,” while cautioning that the full fiscal gains from fuel subsidy removal are still to be fully realised.
What’s Next?
Analysts say Nigeria’s ability to maintain policy discipline, rein in inflation, and manage oil price volatility will determine whether this upward momentum continues. For now, the message from Moody’s is clear: Nigeria is stabilizing, reforming, and regaining credibility in the eyes of global markets.
“This upgrade is more than symbolic—it opens the door to better financing terms, renewed investor interest, and stronger economic resilience,” one Lagos-based economist told New Daily Prime. With strong political will and prudent economic management, Nigeria may be writing the early chapters of a long-awaited financial comeback.
