S&P Global Ratings’ upgrade of Nigeria’s outlook to “positive” has intensified confidence in the central bank’s sweeping currency reforms, which analysts say are boosting investor sentiment nationwide, TEMITOPE AINA reports

The Central Bank of Nigeria’s currency reforms that unify the country’s multiple exchange rates and remove restrictions on foreign‑exchange trading are generating enthusiastic feedback from international rating agencies. Over the weekend, S&P Global Ratings upgraded Nigeria’s outlook from “stable” to “positive” and affirmed a “B‑/B” rating. The agency expressed confidence that the monetary, economic, and fiscal measures being pursued will continue to stimulate growth and attract foreign capital.

Nigeria’s determination to confront several macroeconomic headwinds through FX reform has earned global applause. S&P’s Friday upgrade, which reiterated the “B‑/B” rating, underscored the country’s ongoing economic restructuring.  “The monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term,” S&P said.

In May, Moody’s lifted Nigeria’s rating one notch to “B3” from “Caa1”, citing stronger external and fiscal positions.  Earlier this month, Fitch maintained a “B” rating with a “stable” outlook.  Both agencies highlighted the CBN’s FX reforms as pivotal for current macroeconomic stability and for efforts to curb inflation.

President of the Association of Bureaux De Change Operators of Nigeria, Dr Aminu Gwadabe, welcomed the upgrade. He noted that the reforms have steadied the exchange rate and are helping the economy move toward its growth targets.  Other analysts called the S&P rating “a significant step forward in restoring investor confidence and economic stability.” They added that improved creditworthiness could unlock opportunities across multiple sectors.

When Olayemi Cardoso took office as CBN Governor in October 2023, he placed reform at the top of his agenda, aiming to rebuild economic buffers and boost resilience.  The bank’s policies, including the currency unification, have attracted foreign investment and reduced the need for frequent interventions in the domestic forex market.  Clearing a backlog of over $7bn in FX obligations and unifying rates have lifted Nigeria’s investment outlook, with the World Bank describing the moves as a bold step toward long‑term sustainability.  The country’s sovereign risk spread has fallen to its lowest level since January 2020, wiping out pandemic‑related premiums.

Analysts caution that while the reforms could foster sustained expansion, challenges such as implementation hurdles and volatile global oil prices remain.  To close fiscal gaps, Nigeria entered the debt market last week, raising $2.35bn through a Eurobond to finance its 2025 budget deficit while continuing domestic borrowing.

Rating agency’s feedback

Feedback from other rating bodies also points to steady improvement.  Moody’s Investors Service upgraded Nigeria’s issuer rating from “Caa1” to “B3” with a stable outlook, noting gains in external and fiscal metrics.  The agency later shifted its outlook from “positive” to “stable”, anticipating that progress will continue at a slower pace if oil prices weaken.

In a statement, Moody’s explained that “the recent overhaul of Nigeria’s foreign‑exchange management framework has markedly improved the balance of payments and bolstered the Central Bank of Nigeria’s foreign‑exchange reserves.”  It added that inflationary risks are receding and borrowing costs are easing, reinforcing confidence in the policy direction.

Before Moody’s announcement, Fitch Ratings raised Nigeria’s credit rating from “B‑” to “B” with a stable outlook.  Stakeholders had been monitoring the reforms closely, and the upgrade did not surprise them.  The CBN’s actions—exchange‑rate unification, an electronic FX matching platform, a new FX code, and tighter monetary policy—demonstrate a firm commitment to sustainable growth and exchange‑rate stability.

The Fitch upgrade moved Nigeria’s long‑term foreign‑currency issuer default rating from negative to stable, improving prospects for cheaper international borrowing and greater investor confidence.  Fitch praised the government’s orthodox economic policies adopted in June 2023, including liberalising the exchange rate, tightening monetary policy, ending deficit monetisation, and removing fuel subsidies.  “These have improved policy coherence and credibility and reduced economic distortions and near‑term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks,” the agency stated.

President Bola Tinubu responded to Moody’s upgrade by calling it a “welcome development” and a vote of confidence in Nigeria’s reform agenda.  He reaffirmed his administration’s dedication to prudent management and inclusive growth.  “This upgrade signals to global investors and partners that Nigeria is back on a path of responsibility, reform, and renewed credibility. It underscores our unwavering commitment to transparency, discipline, and prosperity for all Nigerians,” he said.  He added that the rating reinforces confidence in Nigeria’s future and marks a milestone in restoring investor trust and unlocking economic potential.

Managing Director and Chief Executive Officer of Ambosit Capital Managers, Dr Wahab Balogun, noted that a higher credit rating gives Nigeria a stronger foothold in international capital markets, potentially lowering debt‑service costs and freeing fiscal space for development.  “With the stable outlook assigned by Moody’s, Nigeria is not expected to face an imminent downgrade or upgrade. This indicates that the reforms currently in place are perceived as credible, with no immediate risks that could undermine the rating. It also reinforces the view that the government’s policy direction is yielding early positive results, though sustained implementation will be necessary to achieve long‑term benefits,” he said.

He further observed that the dual upgrades from Fitch and Moody’s signal Nigeria’s return to responsible economic management and could restore its standing in global finance.

FX Code

To further boost transparency, the CBN inaugurated the Nigeria Foreign Exchange Code (FX Code) in Abuja. Cardoso launched the code, stressing integrity, fairness, transparency, and efficiency as its cornerstones.  He explained that the FX Code is built on six core principles—ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement—and aligns with international standards while addressing local market challenges.

“The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign‑exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions,” Cardoso said.

The CBN emphasised that the FX Code is not exhaustive but is a comprehensive guide to market conduct. Cardoso noted that 2024 has already seen structural reforms aimed at moving the naira toward a freely determined price and reducing volatility.  Beyond the forex sector, the code forms part of the bank’s broader compliance drive across the financial system, supported by 52 sub‑principles that set benchmarks for all participants.

Complementing the FX Code, the apex bank introduced the Electronic Foreign Exchange Matching System.  The platform, already proven in other economies, provides real‑time data on rates, volumes, and market activity, helping to eliminate distortions, curb speculation, and enhance transparency.

Fitch anticipates that the policy stance will help lower inflation and sustain improvements in the FX market, though inflation is likely to remain higher than in peer countries.  It expects “a continued reduction in external vulnerabilities through further easing of domestic FX supply constraints, while renewed energy‑sector reforms should help sustain current‑account surpluses.”

The agency added that greater formalisation of FX activity, including the electronic matching platform and the new FX code, together with tighter monetary policy, has boosted FX liquidity and stabilised the market after a 40  per cent depreciation in 2024, narrowing the gap between official and parallel rates.

“Net official FX inflows through the CBN and autonomous sources rose by about 89 per cent in the fourth quarter of 2024, compared with an eight per cent rise in the fourth quarter of 2023. We expect continued formalisation of FX activity to support the exchange rate, although modest depreciation is anticipated in the short term.”

These coordinated reforms, analysts say, position Nigeria to attract the private capital—both domestic and foreign—needed to drive diversification, infrastructure development, and inclusive growth in the years ahead.