Moody's upgrades credit outlook on Nigeria due to reforms
Moody's has upgraded Nigeria's outlook to positive from stable, anticipating a potential reversal of the country's fiscal and external challenges due to ongoing reform efforts by authorities. The agency maintained its "Caa1" long-term foreign currency and local currency issuer ratings.
Nigerian President Bola Tinubu aims to stimulate growth and attract substantial investments, addressing issues such as foreign exchange shortages, low oil production, and widespread insecurity in Africa's largest economy. Tinubu has implemented significant reforms, including the removal of a costly fuel subsidy, the elimination of exchange controls, and the lifting of a ban on certain imports.
While these reforms have garnered support from investors, critics, particularly unions, argue that they have led to surging costs. Inflation in Nigeria has remained in double digits since 2016, exacerbating the erosion of savings and incomes. Moody's acknowledged the potential for fiscal and external improvements in the country's credit profile, attributing it to the implemented policy changes and those anticipated in the future.
Points clés à retenir
In a similar fashion to Moody’s decision, S&P Global Ratings adjusted its outlook on Nigeria in August, changing it from negative to stable, while affirming its rating at 'B-/B'. Recently, President Tinubu urged the parliament to approve funds amounting to $8.69 billion and 100 million euros ($107.47 million) for various projects spanning infrastructure, agriculture, health, education, water supply, economic growth, security, employment generation, and financial management reforms. Furthermore, in November, the Central Bank of Nigeria initiated the clearance of $7 billion in outstanding foreign currency forwards, aiming to attract new dollar inflows and stabilize the weakening naira, which has been reaching record lows.