Sopuruchi Onwuka

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Nigeria is earning new confidence from global rating agencies as President Bola Tinubu’s economic overhaul begins to show early traction. Yet the country’s rising debt load and persistent fiscal gaps continue to test how far these reforms can go.

S&P Global Ratings raised Nigeria’s outlook to positive from stable and affirmed its B minus rating. The agency credited the government’s monetary, fiscal, and economic measures and said these policies should produce real gains in the medium term.

The move follows Moody’s upgrade in May and Fitch’s recent decision to keep its rating at B with a stable outlook. Together, these actions signal a shift in how global markets view Nigeria’s policy direction after years of skepticism.

The new ratings restore Nigeria’s position as key driver of economic growth in Africa, aligning with similar economic efforts in South Africa to boost investor confidence and associated productivity boost in the continent.

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S&P lifted South Africa’s rating to BB, its first upgrade since 2005, crediting policy changes and a stronger fiscal path under the country’s new coalition government. With Nigeria and South Africa together making up about 40 percent of sub-Saharan Africa’s GDP, improved ratings for both countries are expected to lower borrowing costs and draw more investment into the region.

Oracle Intelligence reports that the slow economic recovery in Nigeria is yet to be palpable in the domestic markets where inflationary trends sparked off by simultaneous removal of petroleum subsidy and full floating of the Nigeria at the foreign exchange market continue to keep the prices of key commodities high.

Both steps which are considered too risky for a struggling economy bequeathed by the deleterious administration of late Muhammadu Buhari are however commended by international lending institutions including the World Bank and International Monetary Fund (IMF) for dismantling long standing distortions that had drained public finances and discouraged foreign investors.

While citizens are hurt by the prevailing inflation, analysts argue that relief would be underway if the government stays consistent, unlocks stronger growth and builds a more stable macroeconomic environment.

However, challenge is that the country remains vulnerable to swings in global oil prices.

Fears of backslide is sustained by the fact that the prevailing positive sentiments come at a time when Nigeria’s debt profile is under strain, and federal debt continue to climb sharply as revenues fail to fill gaps in the annual budgets.

Interest payments on existing loans continue to consume a large share of government income, constraining recovery efforts and delaying relief for the common man. Whereas the removal of subsidies created fiscal relief for government, significant deficits still form the regular features in annual budgets. As a result, the government continues to borrow at home and abroad, including a recent 2.35 billion dollar Eurobond to help fund the 2025 budget deficit.

Nigeria’s debt mix also poses risks. External commercial borrowing exposes the country to currency swings. Domestic borrowing crowds out private credit. Although reforms may reduce borrowing costs over time, the path ahead requires disciplined fiscal management to keep the debt trajectory from worsening.

Although S&P’s upgrade of South Africa to BB underscores a wider trend that signals positive outlook for Sub Saharan Africa’s two largest economies trying to rebuild credibility after years of political and economic stagnation; the recovery measures are different in both countries.

South Africa’s coalition government has begun tightening its inflation anchor for the first time in decades. Nigeria’s inflation rates unfortunately remain in the upper double digits as the administration of President Bola Tinubu reactivates borrowing plans earlier developed by the late Buhari administration.

For Nigerians therefore, the key concern is whether the optimism from rating agencies can survive the pressures of high debt, inflation risks, and political resistance. The reforms have opened a new path, but the country still needs efficient fiscal planning, improved public spending discipline, and empowered domestic market to maintain investor confidence. The rating upgrades reflect what is possible, not what is guaranteed.