Nigeria’s credit rating has been raised to B by Fitch Ratings, though this still places it in the speculative-grade category.
The decision to upgrade the country’s status was due to improved policy credibility and lower short-term risks to economic stability.
This rating upgrade comes at a challenging time for Nigeria’s budget. Oil prices have recently fallen, which is concerning because oil is the backbone of Nigeria’s economy, providing about 50% of federal budget funding and most of its foreign currency earnings.
“The upgrade reflects increased confidence in the government’s broad commitment to policy reforms implemented since its move to orthodox economic policies in June 2023, including exchange rate liberalisation, monetary policy tightening and steps to end deficit monetisation and remove fuel subsidies,” Fitch said in a statement Friday.
Back in May, Fitch had improved its outlook for Africa’s largest oil producer from stable to positive while keeping its long-term foreign currency debt rating at B-. While better than before, a B rating still falls into the “below investment grade and highly speculative” category.
President Bola Tinubu has introduced major policy changes, including cutting expensive fuel subsidies and allowing Nigeria’s currency (the naira) to trade more freely. While international organizations like the World Bank praised these reforms, they’ve been tough on Nigerian citizens as they’ve caused inflation to rise sharply.
Earlier in the week, the Central Bank of Nigeria (CBN) announced a Balance of Payments (BOP) surplus of $6.83 billion for the 2024 financial year.
The development marks a decisive turnaround from deficits of $3.34 billion in 2023 and $3.32 billion in 2022.
A statement released by the apex bank on Wednesday said the improvement reflects the impact of wide-ranging macroeconomic reforms, stronger trade performance, and renewed investor confidence in Nigeria’s economy.
