Global credit rating agency S&P Global Ratings has upgraded Nigeria’s long-term sovereign credit rating from B- to B, assigning the nation a stable outlook. The agency pointed to a dramatic structural improvement in Nigeria’s external balance of payments, driven largely by the near-capacity operations of the $20 billion Dangote Refinery and Petrochemical Complex and a significant build-up of hard-currency buffers.
According to S&P’s formal rating brief, the mega-refinery—which has successfully ramped up utilization near its 650,000 barrels-per-day (bpd) nameplate capacity—has effectively broken Nigeria’s decades-long reliance on imported fuel, which previously drained nearly $10 billion in foreign exchange annually.
1. The Macro-Fiscal Rebalancing Indicators
The rating upgrade reflects a substantial turnaround in Nigeria’s key macroeconomic indicators, heavily supported by import substitution and rising domestic oil output, which is projected to average 1.66 million bpd:
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Foreign Exchange Accumulation: Nigeria’s gross liquid FX reserves surged to $50 billion, a massive increase from the baseline of $33 billion recorded in 2023.
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Current Account Expansion: The country’s current account surplus is forecasted to hit 5.8 per cent of GDP, up from the 4.8 per cent recorded the previous year. S&P expects this strong surplus position to remain stable through 2029.
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Geopolitical Insulations: By sourcing crude and refining premium motor spirit (PMS), diesel, aviation fuel, and urea fertilizers locally, Nigeria has successfully shielded its domestic market from supply chain shocks and price spikes triggered by ongoing conflicts in the Middle East.
2. Scaling to a 1.4 Million bpd Refining Powerhouse
Looking beyond immediate capacity, S&P highlighted Aliko Dangote’s newly unveiled plans to conduct technical feasibility studies to expand the refinery’s capacity to 1.4 million bpd.
This planned expansion, combined with ongoing government-backed rehabilitation work at state-owned refineries in Port Harcourt, Warri, and Kaduna, is expected to turn Nigeria into a dominant net exporter of refined petroleum products across the West African sub-region and the wider African Continental Free Trade Area (AfCFTA).
3. Persistent Headwinds and Inflationary Horizons
Despite the positive sovereign upgrade, S&P issued a clear warning regarding internal monetary pressures. Headline inflation remains a significant challenge to real GDP growth and domestic purchasing power.
However, assuming the central bank maintains its tight monetary policy stance and foreign exchange liquidity continues to improve, the rating agency projects that these intense price pressures will gradually ease, forecasting headline inflation to drop below the 10 per cent threshold by 2028.
