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S&P's Positive Outlook: What It Means for Nigeria's Stakeholders
S&P Global Ratings updated its outlook for Nigeria to 'positive' from 'stable' over the weekend, supporting the nation's continuous economic reforms, and also maintained the country's rating at 'B-/B'.
"The positive effects of the monetary, economic, and fiscal changes being introduced by Nigerian officials will become evident in the medium term," S and P stated in a release.
The organization stated that it is assured Nigeria's monetary, economic, and fiscal initiatives will consistently drive growth and maintain foreign investment flowing into the economy.
Nigeria's commitment to tackle various macroeconomic challenges through foreign exchange reforms and continuous economic recovery has received international recognition from economic leaders.
It is worth noting that in May, Moody's raised Nigeria's rating by one level to 'B3' from 'Caa1', highlighting significant progress in the nation's external and fiscal conditions, whereas Fitch recently maintained its 'B' rating along with a 'stable' outlook.
The credit rating agencies still highlight the foreign exchange reforms introduced by the Central Bank of Nigeria (CBN) as key factors in maintaining current economic stability and efforts to control inflation.
Previous ratings
Other international rating agencies have evaluated the nation's macroeconomic indicators, showing approval of the current reforms despite.
For example, Moody's changed Nigeria's outlook to 'stable' from 'positive' in May, as it anticipates ongoing improvements in external and fiscal areas, albeit at a reduced rate, should oil prices decline.
The rating agency stated, 'The recent reform of Nigeria's foreign exchange management system has significantly enhanced the balance of payments and strengthened the Central Bank of Nigeria's foreign exchange reserves.'
As per Moody's, the inflation risks in Nigeria, fueled by policy changes, have reduced. Inflation and local borrowing rates are beginning to show signs of decline, which enhances trust in the stability of these policy adjustments, it noted.
Daily Trust states that the downward trend in inflation persisted yesterday, with the rate falling to 16.05 from 18.02 in September.
"The positive outlook indicates our belief that external and fiscal enhancements will slow down but will not be completely reversed," Moody's noted.
Prior to the Moody's analysis of Nigeria, another agency, Fitch Ratings, upgraded Nigeria's credit rating from 'B-' to 'B', maintaining a stable outlook.
Experts note that the Central Bank of Nigeria (CBN) has managed to attain long-term economic growth and exchange rate stability by implementing measures such as unifying exchange rates to minimize arbitrage, introducing an electronic foreign exchange matching platform, adopting a new FX code to boost transparency and efficiency in the market, and enforcing tighter monetary policies to control inflation.
Professor Ndubisi Nwokoma, an emeritus professor of Economics, mentioned in a conversation with our reporter that although economic challenges persist, the exchange rate has stabilized.
Currently, the most recent Fitch rating has upgraded Nigeria's long-term foreign-currency issuer default rating (IDR) from negative to stable, indicating that the nation now has a greater likelihood of drawing in foreign investment, securing loans in global markets with more favorable interest rates, and enhancing investor trust.
Fitch also praised the government's dedication to policy changes introduced after adopting orthodox economic policies in June 2023, such as freeing up the exchange rate, tightening monetary policy, and measures to stop deficit financing along with the elimination of fuel subsidies.
In his reply, President Bola Tinubu referred to Moody's Investors Service increasing Nigeria's long-term foreign-currency issuer rating as a positive step. The President called it a major show of trust in the nation's economic path and continuous reform efforts.
He reasserted his administration's dedication to fostering responsible economic governance alongside encouraging broad-based development.
"This enhancement indicates to international investors and collaborators that Nigeria is returning to a course of accountability, transformation, and restored trust. It highlights our steadfast dedication to openness, order, and wealth for every Nigerian," he stated.
This favorable rating strengthens worldwide confidence in Nigeria's future and marks a significant step in the administration's efforts to rebuild investor trust, unlock economic opportunities, and ensure sustained growth.
The enhancement signifies increasing global acknowledgment of Nigeria's advancements in stabilizing its macroeconomic conditions, boosting fiscal openness, strengthening debt viability, and enacting market-focused reforms during President Tinubu's administration.
What do the new S&P ratings signify
The Finance Minister and Coordinator of the Economy, Wale Edun, has responded to S and P Global Ratings' decision to change Nigeria's outlook to Positive from Stable, stating that it indicates the effectiveness of economic reforms.
The Minister, in a statement published on Saturday, mentioned that the upgrade, which maintains Nigeria's long- and short-term ratings at 'B-/B', represents a significant approval of the fiscal, monetary, and structural reforms being implemented during President Bola Tinubu's leadership.
"I am pleased to learn that S and P Global Ratings has changed Nigeria's outlook to Positive from Stable, while maintaining our 'B-/B' rating," he stated.
This advancement serves as yet another evident indication that the challenging yet essential changes we are implementing are starting to show results and are receiving significant acknowledgment from renowned international organizations.
The Minister noted that S and P's decision reflected the agency's acknowledgment of better growth outlooks, enhanced external safeguards, and more transparent monetary policy results, which are starting to emerge as the reforms begin to have an effect.
These encouraging signs strengthen our dedication to continuing on this path," Edun added. "Although we recognize that there is still more to be done, the groundwork we are laying today will foster inclusive and lasting growth for many years ahead.
He praised President Tinubu for what he called "steadfast leadership and political bravery" in advancing reforms that had been postponed for a long time, and also recognized the perseverance of Nigerians during the transition.
He assured, 'We will keep enforcing carefully planned policies that bring back economic balance, draw in investments, and provide chances for our people.'
These encouraging signs strengthen our dedication to continuing on this path," Edun added. "Although we recognize that there is still more to be done, the groundwork we are laying today will facilitate inclusive and long-lasting growth in the future.
What stakeholders are saying
Head of the Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, commended the improved rating.
He mentioned that the FX reforms have greatly contributed to exchange rate stability and are aiding the economy in reaching the desired growth. Other analysts referred to the S and P rating as "a major step forward in rebuilding investor confidence and economic stability."
After taking office in October 2023, the CBN Governor, Olayemi Cardoso, focused on implementing changes aimed at restoring Nigeria's economic safeguards and enhancing its stability.
The policies of the CBN, such as currency reforms, resulted in foreign investment flows and decreased involvement in the local foreign exchange market.
The alignment of exchange rates and the resolution of a $7 billion FX backlog enhanced the nation's investment prospects, with multilateral institutions, such as the World Bank, referring to it as a courageous move to boost the economy's long-term viability.
Additionally, Nigeria's sovereign risk spread has dropped to the lowest point since January 2020, eliminating the extra cost built up during the pandemic and the following economic pressures. All of these are intentional steps aimed at attracting investors and maintaining capital flows into the economy.
The Managing Director and Chief Executive Officer of Ambosit Capital Managers, Dr. Wahab Balogun, mentioned that an improved credit rating could serve as a basis for Nigeria to reconnect with global financial markets on more advantageous conditions, possibly lowering debt repayment expenses and creating room in the budget for investment in development.
'Owing to the stable outlook granted by Moody's, Nigeria is not anticipated to experience an immediate downgrade or upgrade. This suggests that the ongoing reforms are seen as reliable, with no pressing threats that could affect the rating. It further supports the perspective that the government's policy approach is producing initial favorable outcomes, although consistent execution will be essential to attain lasting advantages,' he stated.
He mentioned that 'the simultaneous improvements from Fitch and Moody's have been viewed within financial and investment communities as signs of Nigeria's re-emergence on a trajectory of prudent economic governance, able to revive the nation's position in international finance.'
As Nigeria aims to draw in more private investment—both from within the country and abroad—to drive its development goals, experts suggest that the enhanced ratings might serve as an effective tool in advancing long-term strategies focused on economic diversification, infrastructure growth, and equitable expansion.
The Central Bank of Nigeria recently made a strategic move to increase transparency and strengthen market confidence by launching the Nigeria Foreign Exchange Code (FX Code) in Abuja. The FX Code has already contributed to the stability of the naira in both official and parallel exchange markets.
Cardoso has recently introduced the FX Code, highlighting integrity, fairness, transparency, and efficiency as essential foundations for promoting Nigeria's economic development and stability.
He highlighted that the FX Code was founded upon six fundamental principles: ethics, governance, execution, information exchange, risk control and adherence, along with confirmation and settlement procedures.
He explained that these principles corresponded to global standards while tackling the specific issues in Nigeria's foreign exchange sector.
As per Cardoso, "The FX Code signifies a major advancement, establishing distinct and binding guidelines for ethical behavior, transparency, and sound governance within our foreign exchange market. The time of hidden practices has ended. The FX Code heralds a new age of adherence and responsibility. According to the CBN Act 2007 and BOFIA Act 2020, breaches will result in sanctions and administrative measures."
At a strategic meeting in Abuja following the announcement, Cardoso stated that the CBN's recent actions are ensuring stability within financial markets and aiding in restoring trust after years of fluctuations.
He mentioned that the updated projection serves as proof that investors are paying attention to the government's initiatives.
Cardoso informed attendees that the CBN had "provided stability to the economy and emerged as a symbol of hope," highlighting that maintaining consistent policies is crucial amid global challenges facing developing nations.
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