S&P Global Ratings has revised its outlook on Nigeria, changing it from negative to stable, applauding the government’s recent reforms that could potentially spur the country’s growth and fiscal outcomes if successfully implemented. The credit ratings agency has reaffirmed Africa’s largest economy at ‘B-/B’.
Nigeria’s new president, Bola Tinubu, has embarked on a bold reform agenda, aiming to ignite growth and attract foreign investors to a nation plagued by chronic dollar shortages that hindered business development.
“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,” S&P said in a statement on Friday.
The President eliminated the decades-long fuel subsidy regime during his inaugural speech, and the Central Bank of Nigeria (CBN) unified the multiple currency exchange window in June.
Tinubu stated on Monday that Nigeria has already saved over 1 trillion naira ($1.32 billion) in just over two months by abolishing a costly petrol subsidy and unifying the country’s different exchange rates.
Although investors have praised Tinubu’s changes, several unions have expressed concern about rising expenses, citing the fact that inflation has stayed in the double digits since 2016, eroding savings and salaries.
On Wednesday, labor unions across the country staged massive protests despite President Tinubu’s promises of a slew of interventions such as a review of the national minimum wage, N75 billion in low-interest loans for manufacturers, the purchase of CNG buses, and cash transfers to MSMEs, among other things.
However, the federal government is still discussing how the post-subsidy actions would be implemented with Labour and trade unions.
The World Bank estimates that the measures will save up to 3.9 trillion naira this year alone, but warns of potential risks.
Frank Gill, S&P’s sovereign analyst, closely observed Nigeria’s development in advance of the Aug. 4 assessment, praising the good indicators displayed by recent changes. S&P maintained Nigeria’s credit rating at “B-/B” in February, but changed the outlook to “negative.”
Meanwhile, rival credit rating agency Fitch confirmed the West African country’s ‘B-‘ grade in May.
