Moody's rating agency raised Nigeria's rating a notch from “Caa1” to “B3” on Friday, due to significant improvements in the country's external and fiscal situation.

This improvement reflects significant progress in Nigeria's external and fiscal positions. The country's more flexible exchange rate has significantly increased external reserves, while the removal of oil subsidies has eased pressures on fiscal spending. Inflation and domestic borrowing costs are showing early signs of easing, indicating that these policy changes are becoming more entrenched

Tax reforms have begun to bear fruit. Despite oil price and exchange rate vulnerabilities, Nigeria's stronger shock absorbers support a B3 rating. The stable outlook indicates that Moody's expects Nigeria's recent progress on the external and fiscal fronts to continue, although at a slower pace if oil prices fall

The Central Bank of Nigeria (CBN) may find it difficult to maintain a flexible exchange rate if oil prices fall further, which could weaken the naira and increase the public debt burden. Continued high inflation could hamper the normalization of interest rates; on the other hand, a history of flexible exchange rate policies and successful fiscal reforms could improve business sentiment, reduce interest rates, and stimulate economic growth beyond baseline expectations