Nigeria’s economic policy shifts, particularly the Central Bank of Nigeria’s (CBN) currency reforms, are earning global recognition, with the latest nod coming from S&P Global Ratings. Over the weekend, the agency revised Nigeria’s outlook from “stable” to “positive” while affirming the country’s “B-/B” rating, citing the effectiveness of ongoing monetary, fiscal, and economic reforms in strengthening growth prospects and sustaining foreign capital inflows.

The S&P upgrade underscores Nigeria’s resolve to confront multiple macroeconomic challenges and reflects international confidence in the nation’s reform agenda. Analysts note that the move signals improved creditworthiness and paves the way for broader opportunities across key sectors, including investment, infrastructure, and industrial development.

Global Rating Agencies Signal Confidence

S&P Global Ratings highlighted that Nigeria’s monetary, economic, and fiscal reforms are expected to generate positive outcomes over the medium term. Similarly, Moody’s upgraded Nigeria’s rating in May, moving the country from “Caa1” to “B3” due to significant improvements in external and fiscal positions. Fitch Ratings also retained its “B” rating with a stable outlook but acknowledged the positive impact of the government’s policy measures.

These global ratings recognize CBN-led FX reforms as central to stabilising the macroeconomic environment and curbing inflationary pressures. The reforms have, in particular, strengthened foreign exchange reserves, improved the balance of payments, and fostered investor confidence.

President of the Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, praised the reforms, stating they have bolstered exchange rate stability and contributed to economic growth. Other analysts described S&P’s upgrade as a “significant step forward” in restoring investor confidence and long-term economic stability.

FX Reforms and Policy Interventions

Since assuming office in October 2023, CBN Governor Olayemi Cardoso has prioritised reforms aimed at rebuilding Nigeria’s economic buffers and enhancing market resilience. Key initiatives include the unification of multiple exchange rates, the removal of FX trading restrictions, and clearing a backlog of over $7 billion in pending foreign exchange transactions.

These measures have enhanced Nigeria’s investment appeal. Multilateral institutions, including the World Bank, have described these interventions as bold steps that strengthen the economy’s long-term sustainability. The country’s sovereign risk spread has also fallen to its lowest level since January 2020, reflecting reduced pandemic-era risk premiums and increased investor confidence.

Analysts note that if sustained, these reforms could underpin long-term economic expansion. However, they caution that global oil price volatility and domestic implementation hurdles remain potential risks to the outlook.

To address fiscal gaps, Nigeria has increasingly tapped debt markets. Recently, the country raised $2.35 billion through a Eurobond issuance to finance the 2025 budget deficit, complementing domestic borrowing efforts.

Insights from Moody’s and Fitch

Moody’s cited Nigeria’s overhaul of its foreign exchange framework as a key factor in improving the balance of payments and bolstering CBN reserves. The agency also noted declining inflationary pressures and lower domestic borrowing costs, signaling early successes in stabilizing the macroeconomic environment.

Fitch highlighted government initiatives, including exchange rate liberalisation, monetary tightening, and the cessation of deficit monetisation, as contributing to policy credibility and enhanced macroeconomic resilience. These measures have reduced economic distortions and strengthened investor confidence in Nigeria’s long-term growth trajectory.

President Bola Tinubu welcomed the upgrades, describing them as a “vote of confidence” in Nigeria’s economic direction. He emphasised the administration’s commitment to prudent economic management, inclusive growth, and sustained reforms that enhance transparency and discipline.

Analyst Perspectives

Dr. Wahab Balogun, CEO of Ambosit Capital Managers, explained that improved ratings lay a foundation for re-engagement with international capital markets under favorable conditions. He noted that the stable outlook from Moody’s indicates that current reforms are credible and that the government’s policy direction is producing early positive results. Balogun emphasised the need for sustained implementation to achieve long-term benefits.

Financial experts view the dual upgrades from Fitch and Moody’s as evidence of Nigeria’s return to responsible economic management. These developments are expected to facilitate the attraction of private capital for domestic and international investment, supporting initiatives in infrastructure, economic diversification, and inclusive growth.

CBN’s strategic FX initiatives

At the core of these positive ratings is the CBN’s proactive approach to enhancing transparency and market confidence. The launch of the Nigeria Foreign Exchange Code (FX Code) in Abuja has been a critical milestone. Governor Cardoso described the FX Code as a framework rooted in six core principles: ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.

The FX Code aligns with international standards while addressing Nigeria-specific market challenges. According to Cardoso, it marks a new era of compliance, accountability, and transparency in foreign exchange operations, signaling the end of opaque market practices. The Code carries the authority of the CBN Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, ensuring enforceability.

In addition, the Electronic Foreign Exchange Matching System (EFEMS) has enhanced market functionality, providing real-time information on currency rates, trading volumes, and overall activity. EFEMS helps reduce market distortions, eliminate speculative practices, and increase transparency—features commonly adopted in developed and emerging markets.

Fitch has emphasised that Nigeria’s macroeconomic policies, including FX reforms and monetary policy tightening, support lower inflation and a more stable exchange rate.

The Central Bank’s interventions, coupled with energy sector reforms and increased formalization of FX activity, are expected to sustain capital inflows while narrowing the gap between official and parallel exchange rates.

Net official FX inflows rose by approximately 89 percent in Q4 2024 compared to an eight percent increase in Q4 2023, reflecting the success of CBN policies. Fitch anticipates that continued formalization of FX activity will support the naira while acknowledging that modest depreciation may occur in the short term.

Implications for Economic Growth

The positive outlook and improved credit ratings have broad implications. They enhance Nigeria’s access to international capital markets at favorable interest rates, reduce debt service costs, and strengthen fiscal space for developmental spending. They also reinforce investor confidence, which is critical for private sector-led growth and infrastructure development.

These reforms complement broader economic policies, including subsidy rationalization, improved fiscal discipline, and strengthened debt management. By integrating monetary, fiscal, and structural measures, Nigeria is laying the foundation for sustainable growth and macroeconomic stability.

While the reforms are promising, analysts caution that sustained implementation is key. Global oil price fluctuations, domestic policy bottlenecks, and inflationary pressures remain risks that could influence the trajectory of Nigeria’s economic recovery. Maintaining transparency, regulatory compliance, and fiscal prudence will be critical to preserving investor confidence and ensuring that the reforms translate into tangible growth outcomes.

Moreover, Nigeria’s journey toward economic stability will require continued coordination between monetary authorities, fiscal policymakers, and private sector stakeholders. Investments in infrastructure, digital finance, and human capital development will further support the country’s reform agenda and facilitate long-term economic diversification.

Conclusion

Nigeria’s recent FX reforms and broader economic policy measures are earning international recognition, reflected in the upgrades and positive outlooks from S&P, Moody’s, and Fitch. These developments signal growing confidence in the country’s macroeconomic management and provide a platform for sustained capital inflows, creditworthiness improvement, and inclusive growth.

The combined effect of FX reforms, the FX Code, EFEMS, and prudent fiscal policies is positioning Nigeria for more stable exchange rates, enhanced investor confidence, and long-term economic resilience. While challenges remain, the country’s ongoing reform agenda demonstrates a commitment to restoring macroeconomic stability, improving transparency, and unlocking its growth potential in a competitive global environment.

Analysts agree that the true measure of success will lie in sustaining these reforms and translating international recognition into tangible improvements in domestic economic outcomes, from investment attraction to job creation and infrastructure development. With coordinated policy action and continued adherence to global best practices, Nigeria’s positive trajectory is expected to persist, supporting the country’s goal of long-term prosperity and economic stability.

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