Nigeria’s Debt Outlook Upgraded to Positive by Moody’s for First Time Since 2023

Moody’s Ratings has returned Nigeria’s sovereign outlook to positive for the first time since December 2023, citing stronger foreign exchange reserves, improving external buffers and stronger-than-expected economic growth.

The global ratings agency on Friday revised the west African nation’s outlook to positive from stable while affirming the country’s B3 sovereign rating, six levels below investment grade.

The decision marks an improvement from December 2023, when the agency last assigned Africa’s third biggest economy, a positive outlook while the country was rated Caa1. Its current B3 rating is two notches higher than it was during that previous positive-outlook period.

Moody’s said in a statement that the improvement in Nigeria’s external position has increased the country’s ability to withstand external shocks, with foreign exchange reserves rising significantly and the current account remaining in surplus.

As of August 24, the country’s external reserves rose above $53 billion for the first time in more than 17 years, reaching $53.11 billion, according to data from the Central Bank of Nigeria.

Moody’s said Nigeria’s current account surplus is expected to remain sizeable even under materially lower oil prices, suggesting that the country’s external position has become more resilient to swings in crude prices.

The firm also expects rising oil production and stronger economic activity to support growth in 2026 and 2027.

Africa’s most populous economy and a major oil producer, has benefited from higher crude production and increased refined petroleum product exports, which have supported its external position.

The World Bank has projected Nigeria’s economy will expand by about 4.2 percent in 2026, saying stronger oil revenues, fiscal discipline and tight monetary policy could strengthen macroeconomic stability and help contain inflation.

Moody’s analysts Jorge Valez and Matt Robinson said sustained economic growth could further strengthen Nigeria’s ability to absorb external shocks.

“Economic growth, if sustained, would enhance the country’s capacity to absorb external shocks, strengthen economic resilience and, over time, support a gradual increase in government revenue,” they wrote in a note cited by Bloomberg.

However, Moody’s stopped short of upgrading Nigeria’s sovereign rating, saying the B3 assessment continues to reflect significant fiscal constraints.

The agency pointed to the country’s limited revenue-generation capacity and weak debt affordability as key constraints on its credit profile, despite a moderate overall debt burden.

The positive outlook therefore signals that Moody’s sees a greater possibility of a rating upgrade if the improvement in its fiscal and external position is sustained.

The decision follows a series of more positive assessments from other major ratings agencies.

S&P Global Ratings upgraded Nigeria’s sovereign rating to B from B- in May, citing sustained structural reforms and improving creditworthiness.

Fitch Ratings affirmed the nation’s sovereign rating at B with a stable outlook in April.

The latest Moody’s decision means all three major global ratings agencies now have Nigeria at or above a B-level sovereign rating, although the country remains firmly below investment grade.

Bayo Onanuga, special adviser to President Bola Tinubu on Information and Strategy, welcomed the decision, saying the positive outlook brings the country closer to a potential credit-rating upgrade.

He said on his Facebook handle that the move also underscores the government’s commitment to fiscal consolidation and economic reforms.