After FTSE Russell Reclassification, Moody’s Upgrades Nigeria’s Outlook on Stronger External Position

*Stock market soars N1.38trn in one day 

*External reserves hit $53.30bn, rise $12.08bn in one year

Nume Ekeghe and Kayode Tokede

Nigeria’s economic and financial outlook received a fresh boost yesterday as Moody’s Ratings upgraded the country’s outlook from ‘stable’ to ‘positive,’ one day after FTSE Russell confirmed the West African country’s return to the Frontier Market classification.
Owing to the positive news, the Nigerian equities market responded with a N1.38 trillion surge in market capitalisation.

Moody’s affirmed Nigeria’s B3 long-term foreign and local currency issuer ratings, but changed the outlook to positive, citing a stronger external position, robust current account surpluses and better-than-expected economic growth.
The latest developments came as data from the Central Bank of Nigeria (CBN) showed that the country’s external reserves had climbed to $53.30 billion as of August 26, 2026, representing a $1.28 billion increase in just over a month and a $12.08 billion rise from $41.22 billion recorded a year earlier.

The combination of improving external buffers, stronger economic growth and renewed international market recognition signals growing confidence in Nigeria’s macroeconomic recovery, even as fiscal vulnerabilities remain.
Moody’s said Nigeria’s gross reserves, excluding gold, Special Drawing Rights and the country’s position at the International Monetary Fund, rose to about $44.4 billion in June 2026, from $31.2 billion a year earlier.

It also noted that Nigeria recorded a current account surplus of 5.1 per cent of GDP in 2025, projecting that this could widen to about 6.1 per cent this year before moderating to 4.1 per cent in 2027.
The ratings agency further pointed to stronger economic performance, noting that real GDP growth reached four per cent in 2025, compared with its previous expectation that medium-term growth would remain closer to 3 per cent.

Inflation has also moderated significantly, falling to 15.4 per cent in July 2026 from 25.3 per cent a year earlier, while the CBN’s restrictive monetary policy stance has strengthened monetary policy transmission, Moody’s said.
Despite the improved outlook, Moody’s retained Nigeria’s B3 rating, warning that fiscal pressures remain significant because of the government’s limited revenue-generating capacity and weak debt affordability.

General government revenue stood at about 10 per cent of GDP in 2025, among the lowest levels globally, while interest payments continue to consume a substantial portion of government revenue despite a moderate debt-to-GDP ratio.
Moody’s said Nigeria could receive an actual rating upgrade if the recent improvement in its external position is sustained or if revenue reforms succeed in substantially increasing government receipts over time.
Conversely, the outlook could return to stable if Nigeria’s external buffers deteriorate significantly or economic growth weakens materially.

The positive outlook followed FTSE Russell’s confirmation on August 27 that Nigeria’s reclassification from “Unclassified” to “Frontier Market” status would take effect from the market open on September 21, 2026.
The development triggered a strong reaction on the Nigerian Exchange yesterday, with investors pushing market capitalisation up by N1.38 trillion, or 0.9 per cent, from N154.442 trillion to N155.826 trillion.
The NGX All-Share Index similarly gained 2,142.38 points, or 0.9 per cent, closing at 241,298.47 points, compared with 239,156.09 points at the previous close.

The FTSE Russell decision followed a further assessment of Nigeria’s transition from a T+2 to a T+1 settlement cycle, after international market participants raised concerns that the new arrangement could create a de facto prefunding requirement for foreign institutional investors.

Following consultations with Nigerian market authorities and feedback from the FTSE Equity Country Classification Advisory Committee, FTSE Russell said it had observed no material settlement, operational or funding difficulties since the T+1 system was introduced.

Meanwhile, CBN data showed that Nigeria’s external reserves rose from $52.02 billion on July 24 to $53.30 billion on August 26, representing a monthly increase of $1.28 billion.

Compared with the $41.22 billion recorded on August 26, 2025, the reserves have increased by $12.08 billion over the past year, providing the country with a larger buffer against foreign exchange pressures and external shocks.

Of the current $53.30 billion gross reserves, $52.76 billion is liquid, while $541.87 million is classified as blocked reserves.