Nigeria is winning back the confidence of international investors and global rating agencies, but the government still faces a major problem at home, as much of its revenue is being swallowed by debt payments.
Foreign reserves have climbed to their highest level in more than 17 years. The naira has become more stable, inflation has slowed, and economic growth has strengthened.
These improvements have convinced global rating agencies that Nigeria is now better positioned to withstand economic shocks.
But the country’s public debt has continued to rise, while the cost of servicing that debt remains one of the biggest pressures on government finances.
The result is a striking contradiction in Nigeria’s economic recovery as the country is becoming safer in the eyes of international investors faster than the government is becoming financially comfortable at home.
Moody’s recently revised Nigeria’s outlook to “positive” from “stable”, citing the country’s stronger foreign exchange reserves and better-than-expected economic growth.
However, the rating agency kept Nigeria’s sovereign rating at B3 and warned that the country still faced fiscal pressure because of its limited ability to generate revenue and the high cost of servicing debt.
The message is clear that Nigeria’s economy is improving, but the government still has a difficult financial problem.
Why Nigeria Is Winning Back Confidence
The numbers that foreign investors and rating agencies are watching have improved significantly over the past year.
Nigeria’s foreign reserves rose from about $42.35 billion in September 2025 to $54.08 billion as of September 3, 2026.
The latest figure is the highest recorded in more than 17 years.
The naira has also become more stable. The official exchange rate stood at around ₦1,421.73 to the dollar in September 2025 and was trading within a range of about ₦1,350 to ₦1,430 by September 2026.
Inflation has also slowed from 18.02 per cent in September 2025 to 15.43 per cent in July 2026.
Meanwhile, Nigeria’s economy grew by 4.43 per cent in the second quarter of 2026, compared with 4.23 per cent in the same period of 2025.
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These gains have helped change the international view of Nigeria.
S&P Global Ratings upgraded Nigeria’s sovereign rating to B from B- in May, citing continued reforms and improving creditworthiness. Fitch had earlier affirmed Nigeria’s rating at B with a stable outlook.
Dr Kazeem Bello, a global financial analyst, told Pinnacle Daily that the improving economic indicators had naturally increased confidence in Nigeria.
“With the economy generating the right spectrum of indices that appear positive and positing robust growth and somewhat stable policies, it is generally normal for international markets and their analysts to reverse the country rating in the upward direction. This is precisely what we are witnessing at the moment,” Bello said.
He said stronger revenue, improved oil production, rising foreign reserves and economic reforms had reduced concerns about Nigeria’s ability to meet its debt obligations.
“What has actually improved is the potential to service the existing debts, which ultimately improves the country’s credit rating,” Bello said.
But Nigeria Still Owes ₦159tn
The improved ratings do not mean Nigeria has paid down its debt.
The country’s total public debt stood at ₦153.29 trillion in September 2025.
By March 31, 2026, the latest available official figure, the debt had risen to ₦159.35 trillion.
This means Nigeria’s economic recovery has improved its ability to manage its debts, but the debt itself has continued to grow.
Dr Felix Ijeh, an economic policy analyst, also told Pinnacle Daily that the better economic numbers had made the debt problem easier to live with rather than solving it.
“In my opinion, Nigeria’s debt problem is not fixed. The better economic numbers we are seeing have mainly made an old problem easier to live with for now,” Ijeh said.
He said Nigeria’s total debt was not unusually high when compared with the size of the economy.
“The debt itself is not a major problem. Nigeria’s total debt compared to the size of its economy (debt-to-GDP) is around 35 per cent. That is moderate. Many countries carry higher loads without collapsing. If that was the only measure, we could say the problem is under control,” he said.
The real problem, according to Ijeh, is the amount of government money required to service the debt.
More Than Half of Gov’t Revenue Goes to Interest
Nigeria’s biggest debt problem is not simply how much it owes. It is how much of its income is being used to pay interest on what it owes.
According to Ijeh, interest payments alone are expected to consume about 54 per cent of the Federal Government’s total annual revenue in 2026.
That means that after the government earns money, more than half could go towards paying interest before money is available for other needs.
“The real pain is servicing the interest portion of the loan obligation,” Ijeh said.
“The IMF says that in 2026, interest alone will take about 54 of annual federal government total revenue. That is more than half. It was already over 50% in 2025 and has been rising. After paying interest, very little is left for roads, hospitals, schools or security.”
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Nigeria spent about ₦16.26 trillion servicing public debt in 2025. The burden in 2026 is projected at between ₦15.52 trillion and ₦15.9 trillion.
This is where the country’s improving credit ratings meet its biggest financial weakness.
Nigeria may now look safer to investors, but the government still has limited room to spend freely because debt payments take away a large share of its income.
Higher Revenue Has Bought Nigeria Time
Government revenue has improved significantly.
Nigeria collected ₦22.59 trillion between January and September 2025 and ended the year with total collections of ₦28.3 trillion.
Tax collections also reached ₦21.6 trillion in the first half of 2026.
The stronger revenue has helped the government continue meeting its debt obligations and reduced fears that Nigeria could default.
Bello said this was one of the most important changes in Nigeria’s financial position.
“What was seriously impacting the rating before was the worries by the global analysts on the worsening revenue crisis in Nigeria that could result in default on the existing debt servicing obligation,” he said.
“With the revenue profile increasing… Nigeria can emerge as one of those countries not being currently impacted by the global shock.”
According to him, Nigeria has not resolved its debt, but it has reduced the immediate danger surrounding it.
“The point here is that the above scenario has not in any way led to the resolution of Nigeria’s debt. It has improved its response elasticity to service its debts and resulted in reducing the deficit financing hole in the national budget,” Bello said.
He added that higher revenue could reduce the government’s need for additional borrowing.
The Recovery Has Created Breathing Space
The strongest evidence from Nigeria’s improving ratings is not that the debt problem has disappeared.
It is that the country has created enough breathing space to avoid a more serious financial crisis.
Foreign reserves are higher, the exchange rate is more stable, inflation has slowed, economic growth has improved, and government revenue has increased.
These changes have made Nigeria better able to handle its existing financial obligations.
“What has actually gotten better is: Foreign reserves are at a 17-year high (about $53 billion). The exchange-rate market works better. Inflation has come down a lot. The economy is growing around 4%. Nigeria is running a solid surplus with the rest of the world,” Ijeh noted.
“These gains are real. That is why rating agencies have become more positive.”
But he warned that Nigeria’s deeper problem remains unchanged.
“Government revenue is still extremely low for the size of the economy. Tax collections have improved sharply in 2026, but debt-service costs have risen just as fast (or faster). So the squeeze on the budget remains,” he said.
Nigeria’s current comfort also depends on conditions that may not last forever.
“The current comfort depends on oil prices, stable exchange rates and remittances staying favourable. Those can change. Raising more revenue in a reliable way is the lasting solution that still has not happened,” Ijeh said.
The latest upgrades and positive outlooks therefore represent a major improvement in Nigeria’s economic standing, but they should not be mistaken for the end of its fiscal problems.
Nigeria has become better at convincing the world that it can meet its obligations.
The harder question is whether it can generate enough revenue to fund its future without continuing to surrender a large share of its income to old debts.
As Ijeh put it: “In short: the patient looks healthier and has more cash in the bank, but the chronic disease (weak revenue) is still there.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X