Morgan Stanley Upbeat on Nigeria’s Sovereign Bonds, Sees Upgrade Cycle

Emmanuel Addeh in Abuja

Morgan Stanley turned positive on Nigerian sovereign bonds, saying the country is better placed to weather low oil prices and predicting more credit-rating upgrades.

Emerging-market sovereign strategist Neville Mandimika raised his view on Africa’s largest oil producer to a “like stance,” citing its improved finances and growing foreign currency reserves, according to a note published by Bloomberg.

“Nigeria is better positioned to absorb softer oil prices than in previous cycles,” Mandimika said. The nation has “entered an upgrade cycle, particularly if reforms, including fuel subsidies, are not reversed ahead of the 2027 elections,” he said.

Global investors are warming to Nigerian assets despite the weakness in crude, which accounts for more than 90 per cent of the nation’s foreign exchange. Citigroup Inc. struck an upbeat tone on the West African country earlier this month, saying it is more resilient to the slump in oil prices than most frontier countries, including Angola.

Last year, both Fitch and Moody’s bumped up their ratings on Nigeria’s debt, citing more stability for its currency, the naira, and a stronger fiscal position.

For now, the nation’s bonds look cheap, according to Mandimika. They’ve handed investors a loss of 0.8 per cent this year compared with an average 0.5 per cent drop for emerging and frontier markets, according to data compiled by Bloomberg.

However, the reassessment marked a notable shift in global investor sentiment after several years in which Nigeria’s assets traded at elevated risk premiums due to FX distortions, weak external buffers, and policy uncertainty.

Morgan Stanley suggested that those constraints are easing, opening the door to a re-rating across Nigerian sovereign debt, FX markets, and equities.

Besides, the bank’s assessment indicates that Nigeria is moving from macro stabilisation toward a potential upgrade phase, boosted by continued reserve growth, FX discipline, and capital-market development.