Agency Report
S&P Global Ratings upgrades Nigeria’s sovereign credit ratings to ‘B’ with stable outlook, citing structural reforms under President Bola Tinubu and key drivers like higher oil production and improved fiscal revenue.
Despite positive outlook, Nigeria faces challenges such as high inflation, unemployment, poverty, and low fiscal revenue but is projected to improve in the coming years.
Nigeria’s macro landscape has significantly changed in three years with key policies like FX liberalization and Dangote refinery operations driving positive economic shifts.
S&P Global Ratings upgraded Nigeria’s long-term foreign and local currency sovereign credit ratings to ‘B’ from ‘B-‘ on May 15, 2026, with a stable outlook. The agency also upgraded Nigeria’s national scale ratings to ‘ngA+/ngA-1’ from ‘ngBBB+/ngA-2’. The move follows three years of structural reforms under President Bola Tinubu, anchored by the 2023 liberalisation of the foreign exchange market and the removal of fuel subsidies.
S&P cited a combination of higher oil production, now averaging 1.65 million barrels per day, the ramp-up of the Dangote refinery to near its 650,000 barrels-per-day capacity, and improved fiscal revenue as the main drivers. Gross FX reserves rose to $50 billion by March 2026 from $33 billion in 2023, and the debt-to-revenue ratio fell to 338% in 2026 from 500% in 2023. The current account surplus is projected to improve to 5.8% of GDP in 2026.
The agency flagged persistent constraints. Inflation averaged 18.6% annually over the past decade, though it is projected to fall to below 10% by 2028. Unemployment stands at around 30%, poverty has risen to affect 50% of the population, and fiscal revenue remains among the lowest of rated sovereigns globally. The government’s general deficit is expected to widen to over 4% of GDP in 2026-2027, partly driven by election-related spending ahead of the 2027 polls.
S&P raised its Brent crude oil price assumption to $100 per barrel for the remainder of 2026, citing the effective closure of the Strait of Hormuz following a Middle East conflict that began in February 2026. While higher oil prices support Nigeria’s external position, S&P noted they are also feeding domestic fuel price increases and adding to inflationary pressure.
The stable outlook reflects a balance between Nigeria’s improved external position and reform momentum against its narrow tax base, weak institutional framework, and low formal employment. S&P said it could raise the rating further if fiscal consolidation or structurally higher revenue reduces debt service costs, and could lower it if reforms reverse or fiscal deficits widen materially.
Key Takeaways
The upgrade is Nigeria’s first from S&P since the country was cut to ‘B-‘ in 2020 during the oil price collapse and COVID shock, and it reflects how much the macro landscape has shifted in three years. The 2023 FX liberalisation — which allowed the naira to depreciate sharply from around 460 NGN per dollar to a trough near 1,600 before recovering to approximately 1,360 in May 2026 — was the single most consequential policy move, clearing a multi-billion dollar FX backlog, restoring market access for corporates, and ending the dual-rate system that had deterred foreign investment for years. The Dangote refinery, now running close to capacity, has structurally reduced Nigeria’s refined product import bill, a long-standing drain on FX reserves. Executive Order 9, signed in February 2026, further tightens federal control over petroleum revenues by redirecting oil and gas inflows — including royalties and taxes — away from NNPC deductions and into the central Federation Account, a move S&P views as positive for fiscal revenue but which has drawn legal and operational pushback from sector stakeholders. The 2027 election cycle now represents the main near-term risk to reform continuity, with the government’s 2026 budget already targeting capital expenditure of 32.2 trillion NGN — 7.3% of GDP — that, if poorly executed as in prior cycles, could widen the deficit without delivering the growth dividends assumed in S&P’s base case.