By Samuel Oechukwu
NIGERIA- The Central Bank of Nigeria’s (CBN) recent currency and monetary policy reforms have drawn significantly positive ratings and recognition from major international credit rating agencies and multilateral financial institutions. This is viewed as a vote of confidence in the new administration’s efforts to stabilize the economy and foster long-term growth.
The three main global rating agencies—S&P Global Ratings, Moody’s, and Fitch Ratings—have all acknowledged Nigeria’s policy shifts:
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S&P Global Ratings: Most recently, S&P revised Nigeria’s sovereign credit outlook from “stable” to “positive”, while affirming the country’s “B-/B” rating. The agency cited the effectiveness of ongoing monetary, fiscal, and economic reforms in strengthening growth prospects and sustaining foreign capital inflows.
Moody’s Investors Service: Moody’s upgraded Nigeria’s issuer ratings by one notch to “B3” from “Caa1”, pointing to notable improvements in the country’s external and fiscal positions due to the reforms.
Fitch Ratings: Fitch retained its “B” rating with a stable outlook and specifically highlighted the positive impact of the government’s policy measures, including the exchange rate liberalization and monetary policy tightening.
The International Monetary Fund (IMF) and the World Bank have also consistently acknowledged the positive impact of the CBN’s reforms, citing indicators such as declining inflation, Naira stability, and rising foreign reserves.
Core CBN Reforms Driving the Positive Change
The international community’s improved perception is largely attributed to the decisive, market-friendly policy shifts undertaken by the CBN under Governor Olayemi Cardoso:
Exchange Rate Unification: The most significant reform was the unification of the country’s multiple exchange rates and the removal of trading restrictions, which corrected distortions in the Foreign Exchange (FX) market and enhanced transparency.
Clearing the FX Backlog: The CBN successfully cleared a backlog of over $7 billion in pending foreign exchange transactions, which was critical in restoring confidence among foreign investors and airlines.
Monetary Policy Tightening: An aggressive tightening cycle (raising interest rates) was implemented to curb excess liquidity and arrest inflationary pressures. This, coupled with higher reserve requirements, has been acknowledged as an orthodox approach to restoring price stability.
Enhanced Transparency: The launch of the Nigeria Foreign Exchange Code (FX Code) and the BMatch FX trading system were steps taken to promote transparency and efficiency in the market.
These reforms have led to measurable improvements in key economic indicators:
Surge in Foreign Reserves: Nigeria’s foreign reserves have surged, reaching their highest level in seven years, providing a stronger buffer for the economy and supporting the Naira.
Increased FX Inflows: Investor confidence has rebounded, leading to a significant rise in capital importation, particularly portfolio investments, as investors are attracted by the improved FX market functioning.
Naira Stability and Disinflation: The exchange rate has shown signs of stabilization, with the gap between the official and parallel market rates narrowing. Simultaneously, headline inflation has started to moderate, or show signs of disinflation.
These positive ratings enhance Nigeria’s access to international capital markets at potentially more favorable interest rates, reduce debt service costs, and reinforce investor appetite, laying a foundation for long-term economic stability.
