Standard and Poor's assigned Nigeria a BB- long-term foreign currency rating, a BB long-term local currency rating, and B short-term sovereign credit rating, saying the country's outlook is table. Standard and Poor's credit analyst Farouk Soussa said that the rating is supported by the country's improving fiscal management, high oil prices and a move towards an oil price-based fiscal rule, reforms in government expenditure, and the recent debt pardon by the Paris Club.
Together, these developments have led to improvements in Nigeria's budget, which achieved a surplus of over 10% of GDP in 2005. The rating agency expects a budget surplus of 16% of GDP in 2006 and 17% of GDP in 2007.
Nigeria is enjoying greater fiscal flexibility than it has ever had in the past and more resources for investment.
However the ratings are constrained by Nigeria's relative political instability, high political risk and poor track-record in orthodox economic policy and structural reform. Religious, ethnic, and regional differences in Nigerian society, uncertainties surrounding the 2007 presidential elections, militia activity in the oil-producing Niger Delta, and years of under-investment are major risks, said Standard and Poor's report.