S&P Upgrades Nigeria’s Credit Rating For First Time Since 2012

S&P cites higher oil prices, stronger refining capacity and economic reforms for Nigeria’s improved sovereign credit rating.

S&P Global Ratings has raised Nigeria’s credit rating for the first time since 2012, citing higher oil prices and the country’s improved capacity to refine and export crude oil.

The credit rating agency upgraded the nation’s long-term sovereign rating by one notch to “B” from “B-”, five levels below investment grade.

The global rating agency noted that higher oil production and prices, the large increase in domestic refining and export capacity, and the 2023 decision to liberalise the exchange rate were boosting Nigeria’s economic growth and balance of payments position.

It stated that, as a sizable net exporter of crude oil and an emerging producer of refined petroleum products, Nigeria was less exposed to the spillover effects of the Middle East conflict than most regional peers.

“We have increased our Brent crude oil price assumption to $100 per barrel for the remainder of 2026, up from our previous estimate of $85 per barrel. Oil production has risen in recent years due to improved security conditions in the Niger Delta producing region, which has helped contain oil theft.

“While we project that the general government deficit will widen to over four percent of Gross Domestic Product (GDP) on average during 2026 and 2027, the implementation of reforms to broaden the tax base from very narrow levels is underpinning a steady decline in Nigeria’s debt-to-revenue ratio to 338 percent in 2026 from 500 percent in 2023.

“The government has ruled out the reintroduction of subsidies on refined petroleum products in order to avoid a return to larger budget deficits and pressure on foreign exchange liquidity. At the same time, with general elections less than a year away, rising fuel prices are impacting inflation and the budget deficit. We have raised our long-term ratings on Nigeria to ‘B’ from ‘B-’ and affirmed our ‘B’ short-term ratings. The outlook is stable,” it explained.

S&P Global Ratings also affirmed its ‘B’ short-term ratings on Nigeria and, at the same time, raised its long- and short-term Nigeria national scale ratings on the sovereign to ‘ngA+/ngA-1’ from ‘ngBBB+/ngA-2’, with a stable outlook.

“The stable outlook balances Nigeria’s improved external position, including higher foreign exchange reserves, improving economic growth, and commitment to economic reform, against a still very narrow tax base and low levels of formal employment.

“We could lower the ratings if the implementation of Nigeria’s reform programme — including the series of critical steps taken to liberalise the exchange rate in 2023 — reverses, or if fiscal policy becomes more expansionary, resulting in widening fiscal and external deficits, or if we see significantly increased debt-servicing requirements.

“We could raise our ratings over the next 12 to 24 months if fiscal outcomes improve significantly, either through fiscal consolidation or structurally higher revenue, resulting in lower debt-service costs. We could also raise the ratings if reforms and policies materially reduce Nigeria’s external imbalances, particularly its still sizable external financing needs,” it warned.

Explaining the rationale behind its action, the agency stated that “following three years of sustained structural reforms, Nigeria’s creditworthiness has improved. Most notably, the liberalisation of the exchange rate has improved access to foreign currency and enabled a market-driven exchange-rate environment, supporting investor and consumer confidence while benefiting non-oil GDP growth.

“Over the past few years, fiscal revenue has also risen as a percentage of GDP due to tax reforms and increased centralisation and transfer of petroleum revenues to the federal government. This follows the signing of the presidential Executive Order to Safeguard Federation Oil and Gas Revenues and Provide Regulatory Clarity (Executive Order 9), which directs the Nigerian National Petroleum Company Limited (NNPCL) to transfer a larger share of its revenue to the federal government account. These factors are likely to continue boosting fiscal revenue and driving further declines in the interest-to-government revenue ratio compared with historical levels.”