Improved Credit Ratings for Nigerian Banks Following Economic Reforms
S&P Global, a leading ratings agency, has upgraded the long-term ratings of seven Nigerian banks, reflecting Nigeria’s recent enhancement of its sovereign credit rating. This upgrade underscores significant economic reforms, better conditions in the foreign exchange market, and an optimistic outlook for growth in the country.
The banks receiving upgrades include Access Bank, Bank of Industry (BoI), Guaranty Trust Bank, Stanbic IBTC Bank, Standard Chartered Bank Nigeria, United Bank for Africa, and Zenith Bank, all raised from ‘B-‘ to ‘B’ with a stable outlook. Fidelity Bank and First City Monument Bank also saw their outlooks revised from stable to positive while retaining their ratings.
Dangote Refinery Gears Up for September IPO Amid Strong Demand
In a significant development, Aliko Dangote, president of the Dangote Group, announced that the Dangote Refinery is aiming for a September launch of its initial public offering (IPO). The refinery has garnered immense investor interest, with requests totaling billions of dollars already received through ongoing private placements.
First Hold Company Chairman Olufemi Otedola commended Dangote’s vision and industrial contributions, declaring him one of Africa’s premier economic leaders. Otedola has personally committed to purchasing a $100 million stake in the refinery, reflecting strong investor confidence.
Economic Outlook Supported by Structural Reforms
The ratings uplift from S&P follows their decision on May 15, 2026, to raise Nigeria’s sovereign credit rating to ‘B’ from ‘B-‘. This change signifies ongoing structural reforms that have enhanced the macroeconomic profile of Nigeria. The liberalization of the foreign exchange market has notably improved access to currency, fostering investor confidence and bolstering non-oil economic growth.
S&P further highlighted that tax reforms and a more centralized approach to oil revenues will enhance fiscal returns, predicting a gradual decline in the ratio of interest payments to government revenues over time.
Future Projections Amid Inflationary Pressures
According to the agency, Nigeria’s real GDP experienced a growth rate of 4% in 2025, driven primarily by an 8.5% rise in oil production and a 3.9% growth in the non-oil sector. While growth is expected to stabilize in 2026 due to inflationary pressures linked to international conflicts, the report suggests that increased government spending and ongoing monetary reforms may help sustain economic resilience.
S&P noted that Nigeria’s status as a net oil exporter and an emerging refined oil producer provides a buffer against broader geopolitical crises. Moreover, the agency expressed confidence in the resilience of Nigeria’s banks, projecting a return on equity of 20-23% for 2026, slightly down from the estimated 25% in 2025.
Challenges Facing the Banking Sector
Despite a generally positive outlook, S&P cautioned that challenges remain for the banking sector, particularly regarding asset quality. The agency predicts that non-performing loans (NPLs) will stabilize at between 6-7% in 2026, while credit losses could continue to be elevated at 2-2.5%. These projections stem from existing pressures on asset quality due to high inflation and rising interest rates.
Additionally, the CBN’s new capital requirements have prompted many financial institutions to successfully increase their capital in recent years. The apex bank’s requirements now stipulate a minimum paid-up capital of N500 billion for banks with international licenses and N200 billion for those operating domestically.
Oil Production and Economic Stability Indicators
On the crude oil production front, S&P forecasts an average output of approximately 1.66 million barrels per day in 2026. The fully operational Dangote Refinery, offering a capacity of 650,000 barrels per day, is positioned to enhance domestic fuel supplies and mitigate external shocks, further stabilizing the economy.
While the outlook appears more favorable, challenges such as persistent inflation, rising poverty rates, and declining purchasing power continue to loom large. Inflation, which has averaged 18.6% annually over the past decade, is anticipated to decrease to 17.7% in 2026, with projections of falling below 10% by 2028.
Moreover, poverty levels in Nigeria have surged, with estimates indicating that 50% of the population is now affected, an increase from 30% pre-2020. The current food insecurity crisis impacts around 31 million Nigerians, a staggering rise from just 4 million in 2019.
