S&P upgrades Nigeria outlook from ‘negative’ to ‘stable’ on reforms

S&P Global Ratings revised its outlook on Nigeria to stable from negative on Friday, citing the government’s recent reforms. The agency affirmed Nigeria’s credit rating at ‘B-/B’, which is six notches into junk.

S&P assesses and assigns a credit rating to countries, indicating their ability to repay debts and their overall financial stability. Other major debt evaluators are Fitch and Moody’s.

– Reforms

Nigeria’s new president, Bola Tinubu, has embarked on a series of reforms in an effort to improve the country’s economy. These reforms include scrapping the fuel subsidy, unifying the exchange rate, and removing the central bank governor.

“Nigeria’s newly elected government has moved quickly to implement a series of fiscal and monetary reforms, which we believe will gradually benefit public finances and the balance of payments,” the ratings agency said in a statement on Friday.

On Monday, Tinubu said Nigeria has saved over 1 trillion naira ($1.32 billion) in just over two months by scrapping the subsidy.

The reforms, praised by investors and the World Bank, have caused severe economic hardship has prices have soared. This week, the Nigeria Labour Congress led a nationwide protest before calling it off after a meeting with President Tinubu.

In February, S&P had maintained Nigeria’s credit rating at “B-/B” but changed its outlook to “negative”. Rival Fitch affirmed Nigeria at ‘B-‘ in May.

– Niger is a risk

S&P said the new reforms could benefit Nigeria’s growth and fiscal outcomes if they are delivered but noted that the country’s planned fiscal spending and inflation remain high.

It also said Nigeria may face geopolitical risks tied to the recent coup in neighbouring Niger. Nigeria is leading a bid by the regional body ECOWAS to reinstate President Mohamed Bazoum, with the regional body threatening military intervention.

“The new government is moving ahead with a series of reforms that could, if delivered, benefit growth and fiscal outcomes,” analysts Ravi Bhatia, Samira Mensah and Juili Pargaonkar wrote. “We believe these measures will gradually benefit Nigeria’s public finances and its balance of payments.”