Nigeria’s credit upgrade does not erase its debt-service problem

Nigeria has received another signal of market approval for its reform programme, but the country’s fiscal problem remains unresolved: debt service is still consuming too much of the state’s revenue.

S&P Global Ratings upgraded Nigeria’s long-term sovereign credit rating from B- to B, citing an improving macroeconomic profile. Reuters reported that the agency pointed to stronger oil production and prices, increased domestic refining capacity and exchange-rate liberalisation introduced in 2023 as drivers of better growth and external performance. The outlook was revised from positive to stable.

The upgrade is politically useful for President Bola Tinubu. Since taking office, his government has pursued difficult reforms, including fuel-subsidy removal, currency adjustment and tax-system changes. Those reforms have strengthened Nigeria’s credibility with rating agencies and investors, especially after years of weak external buffers and currency distortions.

But the upgrade should not be confused with a fiscal turning point. Tinubu warned at the Africa Forward Summit in Nairobi that Nigeria is projected to spend about $11.6 billion on debt payments in 2026, nearly half of government revenue and more than double the $5.15 billion expected in 2025. He argued that high borrowing costs are crowding out spending on infrastructure, health and education.

That is Nigeria’s central macroeconomic contradiction. Reforms are improving the country’s external story, but debt-service costs are still limiting what the government can do with revenue. A higher rating can help reduce market anxiety, but it does not automatically create fiscal space.

The oil story is also complicated. Higher oil production and prices can support reserves and government income, while domestic refining capacity can reduce pressure from fuel imports. But Nigeria remains exposed to oil-price volatility, security risks in producing regions and the political cost of fuel-price adjustments.

Nigeria’s case also sits inside a broader African debt cycle. S&P has warned that African governments face more than $90 billion in external debt repayments in 2026, with Egypt, Angola, South Africa and Nigeria among the largest repayment cases.

For Nigeria, the policy priority is therefore not simply to keep winning rating upgrades. It is to convert reform credibility into lower borrowing costs, higher non-oil revenue, disciplined spending and more productive investment. Without that conversion, the country risks remaining trapped in a paradox: better market sentiment, but limited room to fund development.

Tinubu’s message to global lenders, that Africa needs fairer financing rather than charity, will resonate across the continent. But Nigeria also needs to prove that reforms can deliver at home. Credit ratings can open the door. Fiscal discipline determines what happens after that.