Nigeria’s outlook remains stable despite rising energy costs, financing risks – Businessday NG

Nigeria’s economic outlook remains stable despite renewed inflationary pressures, rising energy costs, and elevated financing risks, as economic reforms and increased domestic refining capacity continue to strengthen the country’s resilience against external shocks, Samira Mensah, head of credit research for Africa at S&P Global Ratings, has said.

Mensah, in an exclusive interview with BusinessDay, said improvements in Nigeria’s macroeconomic stability, supported by higher government revenues and ongoing reforms, had helped offset some of the risks confronting the economy.

Her comments come as S&P Global Ratings’ African Markets Quarterly Highlights: Inflation and Financing Remain Key Risks identifies Nigeria among African economies facing renewed inflationary pressures from tighter diesel supplies, higher food prices and elevated international financing costs.

The report highlights the growing pressure on African economies from geopolitical tensions, disruptions to global energy supply chains and tighter financing conditions, with Nigeria particularly exposed to higher energy costs because of its dependence on diesel-powered generators across several sectors.

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Between December 2025 and September 2026, diesel prices in Nigeria recorded one of the largest increases among the African economies reviewed by S&P.

The agency attributed the pressure partly to tightening global diesel supplies, estimating that approximately two million barrels per day of diesel export supply from the Middle East and Russia had been lost since July 2026.

For Nigeria, the implications extend beyond transportation, as manufacturers, telecommunications operators, logistics companies and small businesses rely heavily on diesel to supplement unreliable electricity supply.

Higher energy costs could therefore increase production and distribution expenses, putting additional pressure on businesses and ultimately feeding into consumer prices.

S&P warned that an average 18 percent increase in diesel prices across African markets could translate into higher food and consumer inflation, further weakening household purchasing power.

However, Mensah said Nigeria’s domestic economic reforms and improved refining capacity had helped shield the economy from some of the external pressures, particularly those arising from the conflict in the Middle East.

“Despite all that, we have seen an improvement in macroeconomic stability, thanks to higher government revenues,” she said.

According to her, the reforms initiated in June 2023 have started improving the country’s economic fundamentals, although inflation remains elevated because of the conditions preceding the reforms.

She explained that fiscal developments also play a significant role in determining domestic financing and credit conditions, as government borrowing influences market liquidity, interest rates, and the availability of funds for private-sector borrowers.

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“The more a sovereign grows into the market, the more it influences the dynamics in that market, in terms of pricing and the liquidity available in that market,” Mensah said.

She added that Nigeria’s oil and gas sector, particularly the expansion of domestic refining capacity, had provided an additional buffer against international energy supply disruptions.

The improvement in macroeconomic conditions has also allowed the Central Bank of Nigeria to begin lowering interest rates, although borrowing costs remain high for businesses and households.

Mensah acknowledged that inflation and interest rates were still elevated but said the economy should be assessed against the much more difficult conditions experienced in previous years.

These improvements, she said, had supported S&P’s decision to improve its assessment of Nigeria and maintain a stable outlook.

In May 2026, S&P Global Ratings rated Nigeria at ‘B’ for long-term foreign and local currency sovereign credit, with a stable outlook.

A stable outlook indicates a broadly balanced assessment of the risks facing the country, with neither an immediate deterioration nor a significant improvement being the agency’s central expectation.

“There are areas of improvement, but there are also certainly the impacts of the reforms that are enabling Nigeria to be resilient at this stage,” she said.

S&P deepens African presence through Agusto acquisition

Beyond its assessment of Nigeria’s macroeconomic outlook, S&P Global Ratings is seeking to strengthen its presence across African credit markets through its proposed acquisition of a majority stake in Agusto & Co., a Pan-African credit rating agency with more than 25 years of experience in the market.

Mensah said Agusto would continue operating under its existing name and as a standalone rating agency within S&P Global Ratings’ broader network of national rating agencies.

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The arrangement is expected to preserve Agusto’s established market identity and local expertise while giving it access to S&P Global’s international network, research capabilities and experience in credit risk assessment.

Agusto operates primarily in Nigeria, with a presence in other African markets, including Kenya, Ghana, and Rwanda.

Mensah said the acquisition was part of a broader model through which S&P Global works with national rating agencies in emerging markets, particularly in Asia-Pacific and Latin America.

She explained that the agencies would retain their local market knowledge while benefiting from knowledge-sharing and collaboration across the wider S&P network.

“The goal and the plan is for them to continue to operate not only under the same name, Agusto, which is really well known to the Nigerian market, but also as a standalone entity,” she said.

According to Mensah, the arrangement would allow national rating agencies to learn from one another, particularly as emerging markets develop new financial instruments and investors demand more sophisticated approaches to assessing credit and investment risks.

She said differences in the characteristics of individual markets make local expertise essential to the development of effective credit assessment frameworks.

The network would also operate alongside S&P Global National Ratings, through which the international agency produces its own national-scale ratings.

“The two models could complement each other, providing additional market intelligence and strengthening the development of credit markets,” Mensah said.

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