May 5, 2025/InvestmentOne Update
The dynamics of the Nigerian economy has witnessed a major shift since the Tinubu led administration began late May 2023, following policy adjustments around the foreign exchange market and PMS subsidy removal. We highlight that these decisions were in tune with policy recommendations from multilateral organizations such as International Monetary Fund (IMF) and World Bank.
Against this backdrop, global credit rating agency, Fitch, recently upgraded Nigeria’s credit rating to B, with a stable outlook. Fitch cited the return to orthodox monetary policy by the CBN as one of the underlying factors for the upgrade and positive outlook. Notably, the new CBN, under the leadership of Mr Olayemi Cardoso has taken a different look.
The central bank has shifted from unorthodox practices, including the implementation of quasi fiscal policies, which was prevalent under the previous central bank regime. Importantly, the MPC raised the benchmark interest rate by 875bps in 2024 whilst also selling money market instruments at attractive rates, in a bid to achieve price stability and lure foreign investors into the Nigerian economy.
We are of the view that the upgrade by Fitch is a positive for Nigeria; however, we do not expect a significant impact on Nigerian sovereign, at least in the short term. We expect this to send a positive signal to investors, further improving confidence and appetite towards the Nigerian market. Furthermore, this should likely aid subsequent Eurobond issuances, if Nigeria attempts to explore the global debt market.
Notably, the last Eurobond issuance in December saw the DMO borrow a sum of USD2.20bn from investors. However, subscription reached 9.00bn, pointing to investors’ keen interest in Nigeria amidst the policy reforms.
Thus, we opine that this upgrade by Fitch, coupled with likely upgrade by other global rating agencies, should continue to drive investors’ sentiment towards Nigeria as policy adoptions continue to permeate the economy. Kindly find HERE, the full report, covering our analysis and considerations.
