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Investing.com -- S&P Global Ratings has affirmed its ’B-/B’ long- and short-term foreign and local currency sovereign credit ratings on Nigeria on May 16, 2025. The outlook on the long-term global scale ratings remains stable. The agency also upheld its ’ngBBB+/ngA-2’ long- and short-term Nigeria national scale ratings.
The stable outlook is reflective of the Nigerian government’s commitment to ongoing reforms, aimed at enhancing economic growth and fiscal flexibility. However, the country’s weak economic fundamentals could be further aggravated by factors such as below-potential oil production, lower oil prices, and weaker external demand.
A potential downside scenario could see the ratings lowered over the next 12 months if the government’s reform program was significantly disrupted, leading to weaker fiscal outcomes and increased debt-servicing needs. Ratings could also be lowered if the government’s administrative capacity weakened or if domestic financial markets were unwilling to absorb additional government local currency debt issuance.
Conversely, S&P Global Ratings could consider raising its ratings on Nigeria over the next 12 months if recent gains to the country’s external accounts became more assured. This could happen if balance of payments surpluses were maintained closer to 2024 levels, allowing for a more material accumulation of usable reserves, and if fiscal consolidation ensues. Maintaining new exchange rate settings through economic cycles and containing inflation could help to improve monetary credibility, which could also support an upgrade.
The ratings agency believes that the pace of reforms will advance but at a slow pace. Further fiscal reforms, aimed at improving fiscal revenue, increasing oil production, and reducing oil theft, are ongoing. Positive impacts from the exchange rate’s liberalization are already visible in a significant improvement to the country’s balance of payments. If sustained, this should help to build unencumbered useable reserves, which could cushion the country in the event of external shocks.
However, the implementation of reforms has become challenging against the backdrop of lower oil prices and weaker external demand. Inflation has moderated but remains high, estimated at above 20% in 2025. After the removal of government fuel subsidies, the implementation of additional revenue-raising measures in an economy marked by low per capita income will be gradual.
S&P Global Ratings expects overall growth to slow slightly in 2025 before accelerating and to average about 3.3% over 2025-2028. This expectation reflects weaker external demand and lower oil prices, which could hamper confidence and reduce investment.
The agency expects a slowdown in improvement of Nigeria’s fiscal metrics, although it notes a marked improvement in the external profile. Accounting for lower oil prices and slower economic and revenue growth, S&P Global Ratings expects the fiscal deficit to average 4.3% of GDP over 2025-2028.
Over 2025-2028, S&P Global Ratings expects the administration of President Bola Ahmed Tinubu to continue advancing important and ambitious reforms. However, implementation challenges, including still-high inflation and slower growth, have increased.
Nigeria is the most populous country in Africa and is a sizable producer and exporter of hydrocarbons, ranking among the world’s top 15 exporters. However, most Nigerians work in the non-oil economy, with just below half of the labor force employed in relatively low-productivity agriculture, which accounts for an estimated quarter of total economic output.
Despite these challenges, Nigeria has seen some success in its efforts to combat militancy and theft, with oil production rising above 1.5 million barrels per day in 2024, from 1.38 million barrels per day in 2022.
Overall, S&P Global Ratings forecasts Nigeria’s real GDP growth at 3% in 2025 and expects it to average 3.3% per year over 2025-2028, primarily via growth in the non-oil sector.
The agency expects Nigerian banks to maintain strong financial performance but real credit growth to remain muted. High interest rates will support profitability as lending typically reprices quickly, while funding predominantly comes from low-cost domestic deposits.
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