FG Welcomes Moody’s Credit Rating Upgrade
…Citing Economic Reforms and Positive Implications
By Patience Ikpeme
The federal government has expressed considerable satisfaction with Moody’s Investors Service’s recent decision to upgrade Nigeria’s Issuer ratings from Caa1 to B3, accompanied by a stable outlook. This significant re-evaluation, according to Moody’s, reflects considerable improvements in Nigeria’s external and fiscal positions.
This positive shift by Moody’s indicates growing domestic and international confidence in Nigeria’s ongoing economic reforms and the advancements in the country’s fiscal and external standing under President Bola Ahmed Tinubu’s administration. The upgrade follows a similar positive action by Fitch Ratings, which recently elevated Nigeria’s credit rating from ‘B-’ to ‘B’, also with a stable outlook.
This marks the second positive rating action by Moody’s since President Tinubu assumed office, building on its previous upgrade from Caa1 Stable to Caa1 Positive in December 2023.
Moody’s stated that the latest upgrade was driven by the Nigerian government’s dedication to correcting macroeconomic imbalances, improving fiscal transparency, and implementing structural reforms. The agency specifically noted key measures such as tax reforms and the adoption of a more flexible, market-driven foreign exchange regime, which it says “has greatly bolstered external reserves.”
Understanding the Upgrade in Nigeria’s Financial Standing
To understand the significance of this development, it’s helpful to know that Moody’s credit ratings assess a country’s ability and willingness to meet its financial obligations, with the scale ranging from Aaa (highest quality) down to C (lowest). Nigeria’s previous rating, Caa1, fell within the “Caa” category, which is considered speculative grade and carried very high credit risk. Obligations rated Caa are deemed to be of “poor standing” and are subject to very high credit risk. The “1” modifier indicated it was at the higher end of this concerning category, signifying significant apprehension about Nigeria’s capacity to repay its debts.
The new rating, B3, moves Nigeria up to the “B” category. While still considered speculative grade, it represents a lower level of credit risk compared to Caa. Obligations rated B are viewed as speculative and are subject to high credit risk. The “3” modifier places it at the lower end of the B category. This move, therefore, represents a notable step in a positive direction, indicating a reduced perception of default risk for the nation.
Positive Implications for Nigeria’s Economy
The one-notch upgrade from Caa1 to B3 brings with it several key positive implications for Nigeria. It signifies a reduced perception of default risk, meaning Moody’s now views Nigeria as less likely to default on its debt obligations than before. While the risk is still categorized as “high,” it is no longer “very high.”
This translates into improved investor confidence, as a better credit rating sends a clear signal to international investors that Nigeria’s economy is becoming more stable and predictable, potentially attracting more foreign direct investment and portfolio investment into the country.
Another significant benefit is the potential for lower borrowing costs. As Nigeria’s creditworthiness gains recognition, it becomes a more attractive borrower. This can translate into lower interest rates on future loans, whether from international financial institutions or when issuing bonds in global markets. Ultimately, this means less money spent on debt servicing and more resources available for crucial development projects.
The upgrade also serves as positive validation of economic reforms, confirming that the government’s policies, particularly those concerning fiscal management and foreign exchange, are having a tangible and positive impact on the nation’s financial standing. Furthermore, a superior credit rating can enhance Nigeria’s access to capital markets, making it easier to raise funds for critical projects aimed at national development.
Adding to this positive outlook, the “stable outlook” accompanying the B3 rating indicates that Moody’s believes Nigeria’s credit rating is unlikely to change in the immediate future, typically over the next 12-18 months. It suggests that while the country’s credit profile has improved, there are no immediate factors that would lead to a further upgrade or a downgrade, conveying a sense of consistency.
“We are encouraged by Moody’s recognition of our reform agenda,” stated Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy. “This positive outlook reflects our administration’s determination and the tremendous work being carried out across various Ministries, Departments, and Agencies (MDAs)— including our monetary policy authorities at the Central Bank of Nigeria (CBN) — to stabilize the economy, attract investment, and ensure inclusive and sustainable growth for all Nigerians.”
Since taking office, the Tinubu-led administration has implemented challenging yet necessary policy measures aimed at addressing long-standing economic issues. These include enhanced revenue mobilization, improved public financial management, and strategic partnerships to unlock infrastructure financing and increase private sector participation.
A statement from the Ministry of Finance indicated that the upgrade of Nigeria’s sovereign rating is particularly timely as the government focuses on accelerating rapid, sustained, and inclusive growth, supported by both domestic and foreign private investment. In collaboration with the Central Bank of Nigeria, the Ministry of Finance remains committed to preserving macroeconomic stability, ensuring debt sustainability, and maintaining sound fiscal management.
“The government will continue to collaborate with both domestic and international partners to boost investor confidence and enhance Nigeria’s global credit standing,” the statement conveyed.
