Moody’s upgrades Nigeria’s outlook to positive, cites Tinubu’s economic reforms

Moody’s, a US-based rating agency, has revised its outlook for Nigeria from stable to positive.

A credit rating is a measure of how likely a company or government entity can pay back its debts, based on an independent assessment of its financial health.

The agency, in a statement on Friday, affirmed the country’s ‘Caa1’ long-term foreign and local currency issuer ratings.

Moody’s said the assessment was based a possible reversal of the deterioration in the country’s fiscal and external position as a result of the authorities’ reform efforts.

“The affirmation of the Caa1 rating reflects Nigeria’s still weak fiscal and external position; the reform efforts may not be enough to improve its credit profile given Nigeria’s outstanding credit weaknesses,” the statement reads.

“Increasingly high inflation generates spending pressure on the government and raises social risks, while the extent of fiscal relief from the removal of the oil subsidy remains unclear at this stage.

“Similarly, the outlook for oil production and external funding inflows remains key for any sustained improvement, but at this juncture remains uncertain.

“More broadly, policy coordination to fight inflation and preserve macroeconomic stability is hampered by institutional constraints, including the absence of reliable data that would support effective policy-making.”

Moody’s also said Nigeria’s challenging economic and social environment characterised by widespread poverty and social inequalities, social unrest due to worsening inflation, could yet derail or reverse the reforms.

President Bola Tinubu’s administration has implemented several initiatives in both the financial and energy sectors in efforts to revive the economy.

During his inaugural speech on May 29, 2023, Tinubu had announced the scrapping of the costly petrol subsidy.

On June 14, 2023, the Central Bank of Nigeria (CBN) also announced the unification of all segments of the forex exchange (FX) market; and later commenced the clearing of the FX backlog in banks in November.

The reforms had elicited an upgrade in Nigeria’s credit outlook from negative to stable, by Standard and Poor’s(S&P), the international rating agency.