Nigeria’s Long Road from Reform to Investor Confidence

Can Nigeria’s economy earn the world’s confidence while businesses struggle with high costs and households wait for relief? Festus Akanbi examines the path ahead.

For a Nigerian manufacturer struggling with unreliable power, expensive credit and imported machinery, a sovereign credit rating may seem remote from the daily business of keeping a factory open. It is anything but. The price the government pays to borrow influences financing costs across the economy. The confidence investors place in public finances shapes their willingness to fund power plants, ports and factories. When that confidence is weak, the bill eventually reaches businesses and households.

That connection gives urgency to the theme of DataPro Limited’s sixth International Rating Webinar, “Sovereign Credit Rating: Africa’s Roadmap to Investment-Grade Status”. Scheduled for 8 October, the discussion comes as Nigeria tries to convert hard-won improvements in economic stability into an enduring recovery.

A sovereign rating assesses a government’s capacity and willingness to meet its debt obligations. Investment grade begins at BBB− on the S&P and Fitch scales, or Baa3 on Moody’s. Crossing that threshold can widen the pool of investors permitted to hold a country’s bonds and, if the underlying improvement is sustained, help reduce borrowing costs. It is a measure of confidence earned over time, rather than a prize secured by declaration.

Nigeria remains some distance from it. S&P Global Ratings recently upgraded the country to ‘B’, citing an improving macroeconomic profile, but that rating is still well below investment grade. The upgrade recognises progress; the distance left to travel shows how much more durable that progress must become.

Cautious optimism is warranted. The International Monetary Fund estimates that Nigeria’s economy grew by four per cent in 2025 and projects 4.1 per cent growth in 2026. It reported gross international reserves of $46 billion at the end of 2025, up from $40 billion a year earlier. Yet the same assessment put the consolidated government deficit at 4.4 per cent of GDP in 2025 and warned that conditions remained difficult for many Nigerians. Inflation had risen to 15.4 per cent in March 2026 as higher fuel and food costs fed through the economy.

This tension is at the heart of DataPro’s theme. Investors can acknowledge stronger reserves and a more credible policy framework while asking whether Nigeria will maintain fiscal discipline, protect its gains against shocks and generate enough growth to improve living standards. Nigerians, meanwhile, are entitled to ask what a better credit profile would do for them.

The answer begins with public spending. When a larger share of revenue goes to servicing debt, less is available for roads, schools, health care, and the power infrastructure businesses need. Better creditworthiness could, over time, lower the government’s financing costs and improve its access to longer-term capital. Those gains would matter only if public money were spent well. Cheaper borrowing used to finance weak projects would leave the country with a better-priced version of the same problem.

A stronger sovereign profile could also help Nigerian companies raise capital. Investors assessing a factory, bank or infrastructure project consider the wider risks of doing business in the country: exchange-rate uncertainty, inflation, regulation and the reliability of public institutions. Greater confidence in the sovereign may improve the terms available to other borrowers, although no rating upgrade can supply electricity, clear a congested port or enforce a contract. Those tasks require action in their own right.

The World Bank’s assessment captures the challenge. It says Nigeria has made meaningful progress in restoring macroeconomic stability, with stronger external and fiscal positions, but household incomes have yet to recover fully and poverty remains high. Stability has created an opportunity; the next test is whether it produces jobs and higher productivity.

That makes the composition of Nigeria’s growth as important as its headline rate. Oil can strengthen export earnings and government revenue, but dependence on it leaves the budget exposed to changes in production and prices. A more resilient credit story requires reliable non-oil revenue and businesses that can earn foreign exchange. Agriculture, manufacturing, technology and services all have roles to play. So does a financial system that can direct long-term savings toward productive enterprises.

Fiscal credibility must be built on equally practical foundations. Government needs to collect revenue fairly and efficiently, account clearly for its obligations, and show that borrowing funds assets with measurable returns. Investors will look beyond a debt-to-GDP figure to ask how much revenue is available to service debt, when obligations fall due and how much exposure is denominated in foreign currency. 

A depreciating naira can make dollar debt more expensive to repay even when no new dollar has been borrowed.

Nigeria’s ambition to build a $1 trillion economy by 2030 makes these questions more pressing. Such an ambition requires sustained investment on a scale that public funds cannot provide alone. Domestic savings, foreign direct investment and capital-market financing will all be needed. Credible policies and reliable institutions can help attract that capital and keep it working in Nigeria.

The range of speakers assembled for DataPro’s webinar offers a chance to examine the problem from several angles. The keynote speaker, Minister of State for Budget and Economic Planning Dr Doris Uzoka-Anite, can address the choices government must make to strengthen growth and public finances. Dr Torsten Schmidt of RWI-Essen brings expertise in macroeconomics and public finance. At the same time, Dr Daniel Cash of the Credit Rating Research Initiative can examine how ratings operate and where their limitations lie.

Mrs Oluwakemi Babalogbon of the Ministry of Finance Incorporated brings the management of public assets and risks into the discussion. Professor Kai Gehring of the University of Bern can speak to the political economy of reform: policies must remain credible through changes of administration and shifts in public pressure. Dr Misheck Mutize of the African Peer Review Mechanism can place Nigeria’s experience alongside that of other African sovereigns. DataPro’s Chief Rating Officer, Prince Oladele Adeoye, will moderate the panel.

Goodwill messages are expected from the Minister of Budget and Economic Planning, Senator Abubakar Atiku Bagudu; the Director-General of the Securities and Exchange Commission, Dr Emomotimi Agama; and the Statistician-General, Prince Adeyemi Adeniran. Their institutions directly affect the discussion. Budget choices, trustworthy statistics and well-regulated capital markets all influence the confidence on which long-term investment depends.

For DataPro and other domestic rating agencies, the task extends beyond explaining the grades assigned by international firms. Independent assessments of companies, financial institutions, projects and subnational governments can help Nigerian investors distinguish sound opportunities from poorly understood risks. Better disclosure can deepen local bond markets and give pension funds and other long-term investors clearer evidence on which to make decisions. That work demands analytical independence: a rating has value only when investors trust the judgement behind it.

Mauritius offers a useful reminder that investment grade is sustained through repeated tests of policy and institutional strength. Its experience cannot be copied wholesale by a country of Nigeria’s size and complexity. Still, it illustrates why diversification, transparency and fiscal management matter long after a favourable rating has been secured.

The most useful outcome of DataPro’s webinar would be a frank account of the steps Nigeria can take now: strengthen revenue without stifling enterprise; make public debt and liabilities easier to scrutinise; preserve progress on inflation and foreign-exchange stability; and invest in the infrastructure and people that allow firms to produce more. These are demanding tasks, measured over years rather than a single rating cycle.

Investment grade would bring Nigeria financial advantages. The deeper benefit would be an economy capable of earning it: one in which  government can fund essential services, businesses can invest with confidence, and households can see progress in their incomes. That is the standard against which the roadmap should be judged.