Nigeria’s outlook is upgraded to “positive” by S&P as Tinubu’s economic reforms pick up steam

Standard & Poor’s (S&P) Global Ratings changed its assessment of Nigeria from “stable” to “positive” on Friday, bolstering the nation’s continuous economic reforms.

A financial intelligence and analytics organization based in New York also confirmed the nation’s “B-/B” rating.

According to a statement from S&P, “Nigerian authorities’ monetary, economic, and fiscal reforms will have positive medium-term effects.”

Nigeria’s external and fiscal conditions have improved significantly, according to Moody’s, which raised the country’s rating from “Caa1” to “B3” in May. Fitch maintained its “B” rating and “stable” outlook last month.

President Bola Tinubu implemented Nigeria’s most radical reforms in decades in 2023, eliminating the pricey gasoline subsidy and limiting currency trade in an effort to boost the country’s economy and draw in international capital, according to Reuters.

According to analysts, if maintained, these reforms could promote long-term economic growth, but there are still dangers associated with implementation challenges and fluctuations in the world oil price.

Nigeria has looked to the debt markets in order to fill fiscal deficits. While continuing to borrow domestically, the nation this week issued Eurobonds worth $2.35 billion to help pay its 2025 budget shortfall.

In the meantime, analysts have expressed new doubts about the legitimacy of Nigeria’s budget process, cautioning that the fiscal system is collapsing into dysfunction as the national budget cycle is distorted and transparency is undermined by repeated extensions of the Appropriation Acts, delayed capital spending, and missing implementation reports.

Predictability in the federal budget cycle from January to December was restored and maintained during the administration of the late President Muhammadu Buhari, which is a noteworthy accomplishment that the current administration has failed to sustain. Reports of capital expenditure delays have also surfaced.

According to BudgIT’s co-founder, Mr. Seun Onigbinde, in a national televised interview, the federal government’s budget preparation and implementation chain has become less cohesive, resulting in overlapping budgetary cycles that are no longer in line with economic priorities or national planning.

Onigbinde emphasized the opaqueness of project implementation.

The sheer volume of initiatives the government is currently working on is beyond our comprehension. The 2023 supplemental budget and the 2023 budget were both extended to 2024. Later on, we noticed that the 2024 budget was also somewhat extended.

We now know that the capital component of the 2025 budget has just begun to be implemented, having begun in October. In October, we will begin implementing the capital budget, which was signed by the president earlier in the year. There is a cross-disconnect, it demonstrates.

Significant reporting requirements are still unmet, he continued, even though the fiscal cycles for 2023 and 2024 have been continuously extended until 2025. “As we enter the third quarter, we still haven’t received any budget implementation reports for the 2025 budget.”

Without these required disclosures, he claims, the public cannot follow government priorities and the accountability chain for capital projects is weakened.

“There is a great deal of distortion because you don’t even know which project is being implemented and how important that project is to national development,” he continued.

He questioned why another appropriation year should be started when residues of past fiscal cycles were still operating concurrently.

He claimed that there appeared to be a rift between the Ministry of Finance, the Budget Office, and the Ministry of Budget and National Planning.

Regarding the financial difficulties, Mr. Tilewa Adebajo, the CEO of CFG Advisory, offered his thoughts.

“It is still necessary to finish the 2025 budget, and the problem has been that revenue inflows have not kept pace with planned expenditures,” he stated.

“The government is only now making an effort to finance the deficit and match spending to actual revenue in order to close out the 2025 budget.” Instead of maintaining a loop where spending continuously exceeds available resources, it is imperative that this process be finished quickly and effectively so that future budgets can be more applicable and realistic.

The urgent need to bring order back to the fiscal calendar was also emphasized by Mr. Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co.

He stated: “We need to go back to the January to December budget cycle so that the budget is approved before December 31st each year.” “It appears that having multiple budgets operating simultaneously distorts things and causes a lot of confusion.”