The Central Bank of Nigeria (CBN’s) decision to embark on currency reforms- unifying multiple exchange rates and subsequent removal of FX trading restrictions are gaining positive feedbacks from global rating agencies. The latest applause came from S&P Global Ratings, which at the weekend revised its outlook on Nigeria to “positive” from “stable”, while affirming “B-/B” rating for the country. The agency is confident that Nigeria’s monetary, economic, and fiscal reforms will continually spur growth and sustain foreign capital inflows to the economy. Precious Ugwuzor reports 

Nigeria’s determination to confront multiple macro-economic headwinds with FX reforms and ongoing turnaround in the economy have earned the economic managers global applause.

The latest came from S&P Global Ratings, which at the weekend, revised its outlook on Nigeria to “positive” from “stable” on Friday, backing the country’s ongoing economic reforms, and also affirmed the country’s rating at “B-/B”.

“The monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term,” S&P said.

In May, Moody’s upgraded Nigeria’s rating by one notch to “B3” from “Caa1”, citing notable improvements in the country’s external and fiscal positions, while Fitch last month kept its “B” rating and “stable” outlook.

The rating agencies continue to cite FX reforms instituted by Central Bank of Nigeria (CBN) as crucial in the current macroeconomic stability and push to tame inflation.

President, Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, applauded the rating upgrade.

He said the FX reforms have really supported the stability in exchange rate, and is helping the economy to achieve desired growth.

Other analysts described the S&P rating as ‘a significant step forward in restoring investor confidence and economic stability.”

According to them, the development means an improvement in Nigeria’s creditworthiness, which could open up new opportunities for the country across several sectors.

Upon assuming office in October 2023, the CBN Governor, Olayemi Cardoso, had prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience.

CBN’s policies, including the currency reforms, led to investment inflows from abroad, and reduced interventions in the domestic forex market.

The unification of exchange rates and the clearing of over $7 billion FX backlog raised the country’s investment outlook, with multilateral organizations, like the World Bank describing it as bold intervention to improve the economy’s sustainability in the long run.

Also, Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy. All these are deliberate efforts to woo investors and sustain capital inflows to the economy.

Analysts said that, if sustained, these reforms could support long-term economic expansion, though implementation hurdles and global oil price volatility still pose risks.

To bridge fiscal gaps, Nigeria has turned to debt markets. Last week, the country raised $2.35 billion through a Eurobond issuance to help finance its 2025 budget deficit, while continuing to borrow domestically.

Ratings from other agencies

Several feedbacks from global rating agencies about Nigeria’s economic status point to steady improvement in the country’s macroeconomic indexes.

For instance, Moody’s Investors Service recently upgraded Nigeria’s Issuer ratings from ‘Caa1 to B3,’ with a stable outlook, citing significant improvements in Nigeria’s external and fiscal positions. The new rating for the country also signals growing optimism about the Nigeria’s economic outlook.

The agency also revised Nigeria’s outlook to “stable” from “positive”, as it expects recent progress on external and fiscal fronts to continue, though at a slower pace, if oil prices fall.

The rating agency in a statement, explained that, “The recent overhaul of Nigeria’s foreign exchange management framework has markedly improved the balance of payments and bolstered the Central Bank of Nigeria’s foreign exchange reserves.”

According to Moody’s, inflationary risks in Nigeria, driven by policy shifts, have diminished. Inflation and domestic borrowing costs are showing nascent signs of easing, bolstering confidence in the stability of these policy changes, it added.

“The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely,” Moody’s added.
Moody’s Upgrades Nigeria’s Issuer Ratings to ‘B3’, Citing Bold Economic Reforms

Before the Moody’s report on Nigeria, another rating agency, Fitch Ratings raised Nigeria’s credit rating from ‘B-’ to ‘B’, with a stable outlook.

The positive Fitch Ratings on Nigeria economy did not come as a surprise to stakeholders who have been keenly watching key economic policies from the monetary and fiscal authorities.

From exchange rate unification to reduce arbitrage in the markets, introduction of electronic FX matching platform and a new FX code to enhance transparency and efficiency in the market as well as deployment of monetary policy tightening to keep inflation on check, the Central Bank of Nigeria (CBN) has demonstrated commitment to achieving sustainable economy growth and exchange rate stability.

Already, the latest Fitch rating moved Nigeria’s long-term foreign-currency issuer default rating (IDR) from negative to stable, meaning that the country stands a better chance of attracting foreign investment, borrow money on international markets at better interest rates, and boost investor confidence.

Fitch also applauded government’s commitment to policy reforms implemented since its move to orthodox economic policies in June 2023, including exchange rate liberalisation, monetary policy tightening, and steps to end deficit monetisation as well as fuel subsidies removal.

“These have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks,” the agency stated.

In his response, President Bola Tinubu described Moody’s Investors Service’s upgrade of Nigeria’s long-term foreign-currency issuer rating as a welcome development. The President described it as a significant vote of confidence in the country’s economic direction and ongoing reform agenda’.

He reaffirmed his administration’s commitment to maintaining prudent economic management while promoting inclusive growth.

“This upgrade signals to global investors and partners that Nigeria is back on a path of responsibility, reform, and renewed credibility.It underscores our unwavering commitment to transparency, discipline, and prosperity for all Nigerians,” he said.

“This positive rating reinforces global confidence in Nigeria’s future and represents a milestone in the administration’s goal of restoring investor trust, unlocking economic potential, and securing long-term prosperity.

“The upgrade reflects growing international recognition of Nigeria’s progress in stabilising its macroeconomic environment, enhancing fiscal transparency, improving debt sustainability, and implementing market-oriented reforms under President Tinubu’s leadership.”

An analyst, Dr. Wahab Balogun, Managing Director and Chief Executive Officer of Ambosit Capital Managers said that a better credit rating provides a foundation for Nigeria to re-engage international capital markets under more favourable terms, potentially reducing debt service costs and freeing up fiscal space for development spending.

“With the stable outlook assigned by Moody’s, Nigeria is not expected to face an imminent downgrade or upgrade. This indicates that the reforms currently in place are perceived as credible, with no immediate risks that could undermine the rating. It also reinforces the view that the government’s policy direction is yielding early positive results, though sustained implementation will be necessary to achieve long-term benefits” he said.

He added that “the dual upgrades by Fitch and Moody’s have been received in financial and investment circles as indicators of Nigeria’s return to a path of responsible economic management, capable of restoring the country’s standing in global finance.”

As Nigeria seeks to attract more private capital—both domestic and international—to power its development priorities, the improved ratings could become a useful lever in supporting long-term plans for economic diversification, infrastructure development, and inclusive growth.

Backbone of positive ratings  

The CBN recently took strategic step to enhance transparency and boost market confidence with the inauguration of the Nigeria Foreign Exchange Code (FX Code) in Abuja. The FX Code has so far ignited naira stability at both official and parallel markets.

Cardoso, recently launched the FX Code, emphasising integrity, fairness, transparency, and efficiency as critical pillars for driving Nigeria’s economic growth and stability.

He emphasized that the FX Code was built on six core principles: ethics, governance, execution, information sharing, risk management and compliance, as well as confirmation and settlement processes.

These principles, he explained, aligned with international standards while addressing the unique challenges within Nigeria’s foreign exchange market.

According to Cardoso, “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”

The CBN has stated that while every effort has been made to ensure that the FX Code comprehensively addresses various aspects of market conduct and practice, it is not intended to be exhaustive.

Governor Cardoso also noted that the journey towards market reform is already yielding results. He stated, “The year 2024 was marked by structural reforms that sought to return the naira to a freely determined market price and ease volatility as several distortions were removed from the market.”

Beyond the foreign exchange market, the FX Code forms part of the CBN’s renewed focus on compliance across the financial sector. Its six guiding principles, alongside 52 sub-principles, were designed to become the benchmark for conduct across all participating institutions.

Issued as a guideline for the foreign exchange market, the FX Code is backed by the authority of the CBN Act of 2007 and the Banks and Other Financial Institutions Act (BOFIA) of 2020.

These legislative instruments empower the CBN to establish and enforce directives regarding the standards financial institutions must follow in conducting foreign exchange business in Nigeria.

The FX Code, therefore, serves as an official directive that all market participants are expected to observe in their operations.

Besides FX Code, the apex bank also introduced the Electronic Foreign Exchange Matching System (EFEMS), which has proven effective in other economies in enhancing the functionality of the foreign exchange market.

The EFEMS was meant to check forex market distortions, eliminate speculative activities and instill transparency. The EFEMS, which is commonplace in developed and developing markets offers real-time information on currency rates, trading volumes, and market activity.

Fitch expects the macroeconomic policy stance to support the move to lower inflation and sustain improvements in the foreign exchange (FX) market’s operation, though it will likely remain much higher than rating peers.

It also expects “a continued reduction in external vulnerabilities through further easing of domestic FC supply constraints, while renewed energy sector reforms should help sustain current account surpluses”.

It added: “Greater formalisation of FX activity including the Central Bank of Nigeria’s (CBN) recent introduction of an electronic FX matching platform and a new FX code to enhance transparency and efficiency, along with monetary policy tightening, has led to a greater rise in FX liquidity and general stability in the FX market after a 40% depreciation in 2024, closing the spread between the official and parallel exchange rates.

“Net official FX inflows through the CBN and autonomous sources rose by about 89 per cent in fourth quarter 2024, compared to an eight per cent rise in fourth quarter 2023. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term.

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