Overview

• In our view, the monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term.
• The growth outlook is improving, for both the hydrocarbon and nonhydrocarbon sectors.
• We have revised our outlook on Nigeria to positive from stable, based on the potential for continued gains, particularly in our external and monetary analysis.
• We also affirmed our ‘B-/B’ sovereign credit ratings on Nigeria.

Rating Action

On Nov. 14, 2025, S&P Global Ratings revised its outlook on Nigeria to positive from stable. At the same time, we affirmed our 'B-/B' long- and short-term foreign and local currency sovereign credit ratings on Nigeria. We also affirmed our 'ngBBB+/ngA-2' long- and short-term Nigeria national scale ratings on the sovereign. The outlook is positive.

Outlook

The positive outlook reflects improving external, economic, fiscal, and monetary results. Despite low GDP per capita, a weak, albeit improving, fiscal revenue base, high debt servicing costs as a percentage of revenues, and challenges in compiling national statistics, we think authorities are taking steps to improve the economy’s growth prospects, and macroeconomic resilience.

Downside scenario

We could revise the outlook to stable if risks to Nigeria's reform program implementation rise or if capacity to repay commercial obligations weakens. This could arise, for instance, from higher fiscal deficits or debt-servicing needs, or because domestic financial markets are unwilling to absorb additional local currency debt. Confidence-sensitive capital outflows could also pose downside risks.

Upside scenario

We could raise our ratings over the next 12 months if Nigeria's economic performance continues to exceed our forecasts, alongside more entrenched fiscal and external gains.

Rationale

Broad-based structural indicators are starting to improve following reform momentum that has been maintained since mid-2023. The reforms were initiated in mid-2023 following the election of President Bola Tinubu’s administration. Since then, a concerted reform drive encompassing the liberalization of the exchange rate regime, significant fiscal consolidation measures (notably the removal of fuel subsidies, and enhanced revenue collection), increased oil production, and the commissioning of the substantial new Dangote refinery have placed external, fiscal, economic, and monetary indicators on a more positive trajectory. While key weaknesses and risks persist, we anticipate the positive trend in related indicators will continue, albeit more slowly. Our growth expectations have strengthened to an average of 3.7% over 2025-2028 (from 3.2% before) following expected higher oil production and improving private sector confidence. We expect inflation to gradually decrease toward 13% in 2028.

More marked improvements in the government’s financing capacity could develop. Our estimates of Nigeria’s external position have strengthened on the back of stronger current account surplus expectations and associated reserve accumulation, which on a gross basis are estimated at just under $44 billion in October 2025. We expect the government’s fiscal efficiency and revenue drive will continue, with a raft of reforms underway or due to be implemented by early 2026. These include organizational clarifications of tax-related powers for each revenue collecting entity under the Nigeria Revenue Service Establishment Act and Joint Revenue Board Establishment Act, and clarifications over its administration and collection as part of the Nigerian Tax and Tax Administration Acts. We expect these measures to improve tax compliance and rationalize existing incentives, improving fiscal outcomes. This, in addition to increased oil production, should help contain government debt levels, assuming the commitment to controlled expenditure-side measures continue as well. We anticipate that election-related expenditure will increase in the run up to the 2027 elections, but do not expect these to cause a prolonged material deviation in fiscal results; we forecast a general government deficit averaging 3.2% of GDP over 2025-2028. Together, these factors should help reduce still-very high debt service costs and help improve the government’s liquidity position.

Increased confidence in the market-driven stability of the naira is a positive factor in our analysis. A willing-buyer, willing-seller model has been established and differentials between official and unofficial rates are very limited. Improved confidence in the country’s foreign exchange (FX) arrangements and removal of FX backlogs have helped attract remittances from the country’s large diaspora, which could be further supported by the country's recent removal from the Financial Action Task Force grey list. This has also been a factor in attracting significant external funding, which has bolstered foreign reserves. However, we understand nonresidents now hold about 25% of local currency debt, much of which is visible in large portfolio inflows. A material outflow (of $4 billion) is visible in first-quarter data, which we associate with U.S. tariff announcements; while growing foreign exchange reserves, a stable exchange rate and high real returns will remain attractive factors for related funding, portfolio funding could be vulnerable to external shocks. While we do not expect recent U.S. designation of Nigeria as a country of particular concern to materially impair its economic prospects, it raises uncertainty and could weaken confidence. Large election-related fiscal deviations could also be disruptive.

Key weaknesses and vulnerabilities will only gradually reduce. We expect fundamentals to strengthen, albeit from a low base. Where Nigeria’s large informal economy likely provides significant additional resilience to shocks--and has been supportive through a period of very high inflation--GDP per capita estimates are very low, at about $1,200. Poverty levels are high, and the effects of inflation, along with the removal of fuel subsidies, are tangible among large portions of the economy. Associated dissatisfaction could pose implementation risks. Fiscal revenue remains among the lowest of rated sovereigns and debt servicing costs very high. Furthermore, fiscal and external data provision is weak, which complicates our analysis of both. We also recently lowered our oil price assumptions for 2026 to $60 per barrel (/bbl) from $65/bbl, which will weigh on fiscal and external revenue.

Institutional and economic profile: Government remains committed to the reform agenda, but implementation risks remain

• We expect President Tinubu’s administration will continue to advance important and ambitious reforms, although these could slow in the run-up to 2027 elections.
• The currency depreciation's impact on inflation should begin to fade but we still anticipate inflation above 20% in 2025 and 2026, compared with above 30% in 2024.
• Our forecasts indicate a stronger growth outlook despite external uncertainty and lower oil prices. Improved confidence and oil production gains should support average growth of 3.7% over 2025-2028.

Nigeria is the most populous country and third-largest economy among rated sovereigns in Africa. It is also a sizable producer and exporter of hydrocarbons, ranking among the world's top 15 exporters. Oil accounts for just 5% of GDP but has contributed over one-third of fiscal revenue and nearly 90% of export receipts over the past few years. Still, most Nigerians work in the non-oil economy, with just below half of the labor force employed in relatively low-productivity agriculture, which accounts for an estimated quarter of total economic output. According to IMF data, only about 10% of Nigerian workers engage in wage employment, primarily in the public sector. While the high level of informality forms an obstacle to increasing tax collection, we also consider it likely provides an element of resilience not captured by the low level of dollar-denominated GDP per capita. Evidence of this is visible in stronger non-oil growth, despite inflation averaging above 25% over 2023 to 2025. Recently rebased GDP--which boosted headline figures by 35%--indicates a larger and more diversified economy than many regional peers. Still, according to the World Bank, poverty rates have increased over this period, which could imply weaker capacity to buffer future shocks.

Efforts to combat militancy and theft are likely to lead to increasing hydrocarbon production. Nigeria has struggled to maintain production levels over the past several years. However, efforts against militancy and theft appear to have yielded results, with Nigerian National Petroleum Corp. (NNPC) production rising to an average of 1.60 million barrels per day (mbpd; including associated condensate) from 1.38 mbpd in 2022. We expect further investments from the new owners of fields--including those not owned by NNPC--along with a continued effort to contain losses and theft, to increase production through 2027. Substantial additional refining activity has also come online, as the new large refinery (and petrochemicals facility) owned by the private-sector Dangote group has started production and will increase output toward its 650 million barrel maximum annual capacity. In addition, other refineries, such as at Port Harcourt, Warri, and Kaduna, are being rehabilitated, which should significantly contribute to Nigeria's overall refining capacity in the next few years. The additional capacity will benefit the economy, with potentially a further net positive impact on the country's balance of payments.

We now expect Nigeria's real GDP growth to average 3.7% (from 3.2% previously) over 2025-2028, through both the non-oil and oil sector. Initial second-quarter 2025 growth estimates stand at 4.2%, driven predominantly by the oil sector. As inflation gradually declines and monetary policy loosens, we expect consumption to contribute most to growth, although we still expect per capita GDP will remain low, also reflecting the country's high population growth. To note, high-frequency indicators have improved in second-half 2025, in particular services and agriculture, indicating improved confidence. While reforms will likely increase growth in the later years of our forecast period, for 2025 and 2026, a still-tight monetary policy and further revenue-raising reforms will likely contain the expansion.

Flexibility and performance profile: The government's focus on revenue mobilization will moderately improve its fiscal position through 2028

• We expect structural fiscal pressures to improve over 2025-2028, but very high debt service costs and a low revenue base will remain. Still, we forecast a gradual improvement under the Tax Administration Act, which through a number of related administrative changes, should widen the tax net, increase compliance, raise taxes, and optimize subsidies.
• Following the rebasing of GDP, the government's net debt burden has fallen to just above 40% of GDP (from above 50%) and we forecast this level to be relatively stable.
• The combined impact of a weaker currency, the removal of fuel subsidies, and additional refining capacity have resulted in a greatly reduced import bill, and we expect the current account to remain in a surplus position over 2025-2028.

We expect Nigeria's current account will maintain a stronger surplus position, and that reserves will accumulate. Multiple factors explain the significant improvement in the 2024 current account surplus, to nearly 7% of GDP from 1.6% in 2023. These include a reduction in imports due to sharp depreciation of the domestic currency; the removal of fuel subsidies (higher prices and less cross border trade have reduce demand); the opening of the Dangote refinery (which reduces the need for refined imports and cuts import-export arbitrage opportunities); and an increase in oil production toward 1.70 mbpd. As a result, we understand the third-quarter gross reserve figure is just under $44 billion, a marked increase from $33 billion in 2023. While we expect import demand will increase as consumption strengthens and for lower oil prices to reduce export earnings, we also expect external surpluses will support foreign currency liquidity and the country's net external liability position, which is approximately 50% of current account payments in 2025, after subtracting less-liquid assets.

Following the rebasing of GDP, we estimate Nigeria's net general government debt stock will average about 41% of GDP for 2025-2028. Still, given the government's stock of foreign currency debt, which accounts for about half of the total, we think this is still susceptible to exchange rate depreciation. Our net general government debt calculation consolidates debt at the federal, state, and local government levels, and is net of liquid assets. Our calculation includes the Asset Management Corp. of Nigeria (created to resolve Nigerian banks' nonperforming loans). We also include CBN OMO bill issuance in our debt stock calculations. We include interest payments on CBN bills and Ways and Means in our calculation of current total interest costs, with the latter having fallen due to the recent Ways and Means deal's securitization. We expect fiscal deficits to remain contained over the forecast, averaging about 3% of GDP, which includes a revenue growth assumption of just above 0.5% of GDP per year, based on the anticipated impact of continued reform implementation.

To calculate usable reserves, we deduct about $8 billion from gross FX reserves to account for those borrowed from domestic banks and other resident counterparties via the forwards markets. We do not deduct FX that the monetary authority has borrowed from nonresidents via offshore markets (just under $17 billion as of end-2024, according to Nigeria's international investment position data). The amounts the authority has borrowed from abroad are classified as short-term other public sector external debt, and this is reflected in our estimate of Nigeria's gross annual external financing needs (and in many of our external sustainability ratios). We project usable reserves (gross reserves minus reserves held for forwards) to average about $40 billion over 2025-2028, compared with our previous estimate of $33 billion.

Following the liberalization of the FX market in mid-2023, a "willing buyer-willing seller" model has been established. This led to a significant depreciation of the currency, which stood at Nigerian naira (NGN) 1,450 per U.S. dollar in November 2025, from about NGN460 pre-liberalization in May 2023. Still, we expect real credit growth will remain muted and overall credit to the private sector will remain below 30% of nominal GDP Remaining valid FX backlogs have been cleared and market liquidity and clearing have improved. Continued high rates cause us to forecast muted credit growth but we expect that banking system profitability will remain resilient.

Environmental, social, and governance (ESG) credit factors for this change in credit rating/outlook and/or CreditWatch status:

• Governance--Other factors

In accordance with our relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable (see "Related Criteria"). At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision.

After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts.

The committee’s assessment of the key rating factors is reflected in the Rating Component Scores above.

The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action (see "Related Criteria").

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