Moody’s Upgrades Nigeria’s Rating to ‘B3’ on Better External and Fiscal Positions

Moody’s upgraded Nigeria’s credit rating from ‘Caa1’ to ‘B3’ due to improvements in the country’s fiscal and external positions. The World Bank noted Nigeria’s fastest economic growth in a decade while cautioning about ongoing inflation challenges. Moody’s described enhanced foreign exchange management as a key factor and stated that the outlook had changed to “stable,” anticipating a slowdown in economic improvements without reversal.

Moody’s Investors Service has raised Nigeria’s credit rating from “Caa1” to “B3,” acknowledging the nation’s improved fiscal and external positions. This upgrade comes as a relief as Nigeria’s economy reportedly achieved its fastest growth in a decade in 2024, mainly due to a strong showing in the last quarter.

In a recent report, the World Bank emphasized the positive shift in Nigeria’s economic landscape while still cautioning that high inflation remains a pressing issue. It is a reminder that despite the gains, challenges still lurk beneath the surface.

Moody’s credit ratings agency highlighted how recent changes in Nigeria’s foreign exchange management have significantly strengthened the balance of payments and increased the Central Bank of Nigeria’s foreign exchange reserves. This is a crucial step towards stabilizing the economy further.

Inflationary pressures in Nigeria, previously exacerbated by policy changes, seem to be easing slightly. Inflation rates and domestic borrowing costs are showing tentative signs of slowing down, which brings a flicker of hope for deeper stability in fiscal policies moving forward.

Despite the upgrade, Moody’s shifted Nigeria’s outlook from “positive” to “stable,” reflecting expectations that improvements in the fiscal and external sectors may slow down, especially if there is a dip in oil prices. The agency underscored that while the outlook is stable, recent advances are not likely to be completely overturned, just decelerated.

Moody’s upgrade of Nigeria’s rating to ‘B3’ signifies a recognition of the country’s improved economic conditions, particularly in terms of fiscal and external stability. Despite ongoing challenges such as high inflation, the positive changes, particularly in foreign exchange management, indicate a direction of progress. However, the shift to a “stable” outlook suggests that while improvements are present, growth may slow down in the future, especially in light of volatile oil prices.

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