On Friday, S&P Global joined Fitch and Moody’s in raising Nigeria’s credit rating. Politicians and top government officials called it a huge achievement. Financial analysts welcomed the development. And millions of Nigerians woke up to the same prices, the same power cuts, and the same strain on their wallets.
So what exactly happened, why does it matter, and will any of it reach the person selling tomatoes in Mushin or fixing motorcycles in Kano? The honest answer is complicated, and worth understanding.
First: what is a credit rating, and why should anyone care?
Think of a credit rating the way you would think of a personal credit score, except for a country rather than an individual.
When Nigeria wants to borrow money from international lenders – by issuing bonds on global markets – those investors want to know: how likely is it that we will get our money back? A credit rating agency like S&P, Fitch, or Moody’s studies a country’s finances, its economy, its debt levels, its governance, and produces a letter grade as its answer.
The higher the grade, the more trustworthy the borrower, and the lower the interest rate investors demand in exchange for lending. The lower the grade, the riskier it looks, and the more expensive every loan becomes.
Nigeria was just moved from B-minus to B. That is still deep in what the industry calls “speculative grade” – or, bluntly, junk territory. Investment grade, the threshold that unlocks the largest, most patient pools of global capital, is still several rungs above. But the direction of travel now has the endorsement of all three of the world’s most influential rating agencies.
What did S&P actually say?
The agency pointed to three main reasons for the upgrade:
Oil is working better for Nigeria than it has in years. Production has risen. Output averaged around 1.65 million barrels per day in 2025, up from 1.38 million in 2022, when where theft and pipeline sabotage once cost the country hundreds of thousands of barrels a day.
The Dangote refinery is now running near full capacity at 650,000 barrels per day. For a country that historically exported crude oil and then imported the same oil back as expensive refined fuel, this is a major shift. Nigeria now has something it never had before at scale: the ability to turn its own oil into petrol, diesel, and other products domestically.
The foreign exchange liberalisation of 2023, painful as it was, is paying dividends. Before Tinubu ended the old fixed-rate system, businesses spent months trying to access dollars at the official rate while a parallel market flourished. Foreign investors stayed away because they could not easily get their money out. That era is largely over. Monthly dollar turnover in Nigeria’s foreign exchange market hit $10 billion in April 2026 alone, against a 2024 average that was 56 percent lower.
S&P also said that Nigeria’s debt-to-revenue ratio has fallen from 500 percent in 2023 to a projected 338 percent in 2026. That is still alarmingly high – it means Nigeria spends more than three times its annual revenue just on the stock of debt it holds – but the direction has changed. Interest payments, which consumed 39 kobo of every naira of government revenue in 2023, are projected to fall to around 21 kobo by 2029.
Why ordinary Nigerians cannot feel this yet
S&P’s own document is unusually candid about the gap between the macroeconomic improvements and what life is like on the ground.
Poverty has risen to more than 60 percent of the population. Food insecurity now affects 31 million Nigerians, up from about 4 million in 2019. Unemployment, by the old methodology, stands at roughly 30 percent. Inflation has averaged 18.6 percent per year over the past decade and is only now beginning a slow descent.
The Dangote refinery, despite its scale, has not meaningfully lowered pump prices. S&P explains why: because the refinery now operates in a deregulated market, global oil price trends – not domestic production costs – set what Nigerians pay at the pump. When Middle East tensions sent crude prices higher this year, Nigerian fuel prices followed. The refinery is a net positive for the country’s finances and its balance of payments. For the person filling a tank or running a generator, the relief has not materialised.
One analyst on X put it this way: “The bread-seller in Mushin does not borrow from JP Morgan or from the international debt market, so the immediate effect on her bottom line is zero.”
He is right. And the rating agencies know it. The question is not whether the upgrade is real. It is how long the transmission takes.
The three channels through which it could eventually reach you
The benefits, if they come, travel through three indirect routes.
The first is cheaper government borrowing. Nigeria carries an enormous debt load, much of it expensive. A better credit rating means that when the government refinances old debt or raises new money on international markets, it pays a lower interest rate. Every percentage point saved on billions of dollars of sovereign debt is money that, in theory, does not go to creditors and could instead go to roads, hospitals, schools, or security. In theory.
In practice, of course, things do not go that way in Nigeria – at all. Even when the government makes more money, they are substantially squandered or stolen by politicians. The savings realized from the removal of fuel subsidy, while shared between the federal and state governments monthly, have not significantly benefitted Nigerians. At the same time governors and federal officials splurge the huge funds on costs that barely touch on the people.
The second channel is the naira. Lower country risk attracts foreign investment – both long-term direct investment in factories and infrastructure, and shorter-term portfolio flows into Nigerian stocks and bonds. More dollar inflows support the naira. A more stable naira slows imported inflation, which affects everything from pharmaceuticals to electronics to the cost of goods transported on fuel. This is the channel where the market trader is most likely to feel it first, even if the link is indirect.
The third channel is private sector credit. When Nigerian companies can borrow more cheaply – because the country they operate in is perceived as less risky – they can expand. Expansion means hiring. Hiring means income. Income means demand. This chain is long and uncertain, but it is real.
What could go wrong
S&P was explicit about the risks, and they are significant.
Elections are less than two years away. The agency noted that fiscal policy tends to loosen before Nigerian elections – more spending, more pressure to ease reforms – and that the 2027 cycle is already influencing the government’s budget, which targets a wider deficit this year through increased capital spending. The rating could be reversed if reforms are rolled back, if fuel subsidies return in any form, or if fiscal discipline slips materially.
S&P also flagged Nigeria’s dependence on oil revenue – still over one-third of government income despite oil being only five percent of GDP – as a vulnerability. And it noted that the country’s tax base remains “among the lowest of rated sovereigns.” Most Nigerians work in an informal economy that is nearly impossible to tax efficiently. That is both a constraint on the upgrade and a structural challenge no rating agency can resolve.
There is also the question of whether the fiscal space created by cheaper borrowing actually reaches public services. As the X analyst noted pointedly, reports of ruling party governors directing resources toward the 2027 presidential campaign are not reassuring signals that reform dividends will be invested rather than consumed.
Discover more from Pluboard
Subscribe to get the latest posts sent to your email.