Nigeria, others get rating improvements

A comprehensive review of Africa’s sovereign credit ratings for the second half of last year has  revealed a continent making significant yet uneven progress on economic reform, with positive developments outnumbering setbacks for the first time in years.

The Africa Sovereign Credit Rating Review, a collaborative effort between the African Peer Review Mechanism and the United Nations Economic Commission for Africa, documented how nine African countries received credit rating upgrades during the period from July to December 2025.

These improvements signal growing confidence in the region’s economic management, even as challenges around debt sustainability persist.

Nigeria received a positive outlook revision from S&P, reflecting improvements in economic management and external balances following comprehensive fiscal, monetary, and exchange rate reforms. According to the report, Nigeria’s stronger medium-term growth prospects have been supported by policy changes designed to address long-standing structural challenges in Africa’s largest economy.

The positive outlook change places Nigeria alongside Uganda, Rwanda, and Cape Verde as countries where rating agencies see potential for future upgrades if current economic trends continue.

The recognition comes as the country returned to international markets in November with a substantial 2.35 billion dollar Eurobond issuance that attracted over five times oversubscription, demonstrating strong investor appetite despite high coupon rates of 8.63 percent for a ten-year bond and 9.13 percent for a twenty-year bond.

Among the notable success stories, Morocco regained investment-grade status after Standard & Poor’s upgraded its sovereign rating, citing sustained fiscal consolidation and robust economic diversification across tourism, manufacturing, and renewable energy sectors. The North African nation reduced its fiscal deficit to 3 percent of GDP while implementing structural reforms in tax and social security that reinforced investor confidence.

South Africa achieved its first sovereign upgrade in nearly two decades, with S&P restoring confidence in the country’s fiscal trajectory. The upgrade reflected narrowing fiscal deficits, a projected third consecutive primary surplus, and reforms that reduced contingent liabilities at state-owned enterprises, particularly in the troubled energy sector.

Ghana and Zambia, both of which have been navigating complex debt restructuring processes, received upgrades from multiple rating agencies. Ghana’s improvements were supported by sustained progress on external commercial debt restructuring and macroeconomic stabilization under International Monetary Fund-backed reforms. Zambia’s upgrade reflected significant advances in restoring stability following its 2020 default, with the country introducing an innovative pilot program allowing mining companies to make tax payments in yuan to reduce currency conversion costs when repaying Chinese creditors.

However, the review also documents significant setbacks for some nations. Senegal experienced rating cuts from both Moody’s and S&P after audits revealed previously undisclosed debt that significantly increased the country’s debt burden. Madagascar faced a downgrade following political instability triggered by a military takeover, while Botswana’s rating suffered due to weakened fiscal buffers amid collapsing diamond revenues.

The report highlighted persistent structural challenges in how global rating agencies assess African economies.

Authors noted that agencies often lag behind real-time economic progress, with ratings failing to reflect meaningful improvements in fiscal management and structural reforms.

 The sovereign ceiling framework continues to constrain domestic institutions, making it difficult for well-managed African banks and corporations to receive ratings higher than their sovereign governments. A particularly contentious issue involves how agencies assess domestic financing strategies.

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The report argued that increased local debt issuance is often viewed negatively as a fallback from lost external access, rather than recognized as a proactive policy choice that reduces foreign exchange exposure and strengthens domestic financial systems.

 Senegal’s successful $5.3 billion fundraising through the West African Economic and Monetary Union regional capital market, which saw all issuances oversubscribed, was largely overlooked by rating agencies that focused instead on debt sustainability concerns.

Looking ahead, the report recommends that rating agencies strengthen their capacity to reflect real-time economic progress through institutionalised dialogue platforms with African governments. It called for broader credit assessments that recognize strategic domestic borrowing as legitimate policy choices rather than signs of distress, and urges adaptation of global rating frameworks to account for informal economies, structural reforms, and development priorities unique to African contexts.