International ratings agency S&P Global Ratings has upgraded Nigeria’s long-term credit rating to ‘B’ from ‘B-’, citing stronger foreign exchange reserves, reforms in the oil sector, and rising refining capacity.
However, the agency warned that growing election-related spending and rising fuel prices could still weaken the country’s fragile economic gains.
In its latest sovereign rating released on Friday, S&P said Nigeria’s improved economic position was driven largely by exchange rate reforms introduced in 2023, higher crude oil production, and the rapid expansion of domestic refining led by the Dangote Industries Limited refinery project.
The agency said the government’s reforms had improved investor confidence and strengthened Nigeria’s balance-of-payments position, helping foreign reserves rise sharply from about $33 billion in 2023 to nearly $50 billion in early 2026.
“We have raised our long-term ratings on Nigeria to ‘B’ from ‘B-’ and affirmed our ‘B’ short-term ratings. The outlook is stable,” S&P stated.
However, beyond the upgrade, the agency raised concerns over the political and economic pressures building ahead of the 2027 general elections.
It warned that increased government spending tied to elections and infrastructure projects could widen the fiscal deficit over the next two years.
“We project the general government deficit will widen to over 4 per cent of GDP on average during 2026 and 2027,” the report stated.
S&P also noted that while Nigeria’s new refining capacity would improve exports and reduce dependence on imported fuel, it may not bring immediate relief to consumers already battling rising living costs.
The agency said petrol and diesel prices had climbed significantly since the Middle East conflict began in February 2026, as domestic fuel prices are now more closely tied to global oil prices following the removal of fuel subsidies.
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“Domestic refining capacity is unlikely to significantly alleviate pressure on fuel prices for consumers,” the agency said.
According to S&P, inflation and worsening poverty remain major threats to Nigeria’s reform agenda despite signs of economic recovery.
The report noted that poverty levels in Nigeria have risen to about 50 per cent of the population from 30 per cent before 2020, while food insecurity now affects about 31 million people.
It added that inflation, which averaged 18.6 per cent over the past decade, continues to weaken household purchasing power, although it is expected to slow gradually in the coming years.
S&P said there were also risks that social pressure from rising fuel and food prices could weaken public support for key reforms, especially the removal of petrol subsidies.
The agency nevertheless praised the Tinubu administration for maintaining difficult reforms despite economic hardship.
“We expect President Bola Tinubu’s administration to continue to advance economic and fiscal reforms,” it said.
The report highlighted the impact of Executive Order 9, signed in February 2026, which directs more oil and gas revenues into the Federation Account instead of allowing deductions previously retained by the Nigerian National Petroleum Company Limited.
According to S&P, the move is expected to improve government revenue and gradually reduce Nigeria’s debt servicing burden.
The agency projected that Nigeria’s debt-to-revenue ratio would decline to 338 per cent in 2026 from about 500 per cent in 2023.
S&P also pointed to improvements in the foreign exchange market after the liberalisation of the naira in 2023.
It said businesses and investors now have better access to foreign currency, while monthly FX market turnover rose sharply in 2025 and early 2026.
Despite the positive outlook, S&P warned that Nigeria’s ratings could be downgraded again if reforms are reversed, fiscal deficits widen significantly, or debt servicing costs increase sharply.
“We could lower the ratings if the implementation of Nigeria’s reform programme reverses, or if fiscal policy becomes more expansionary,” the agency warned.
S&P hinted that Nigeria could secure another upgrade within the next two years if fiscal reforms continue, government revenues rise further, and external imbalances reduce significantly.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X