Moody’s, a U.S.-based credit assessor, has upgraded Nigeria’s forex debt from Caa1 to B3, noting that the “removal of oil subsidies” and tax reforms improved the country’s financial health.

In a statement on Friday, Moody’s said the fuel subsidy removal initially caused inflation but that it was starting to ease, as the government no longer spends a chunk of its budget to subsidise oil. With the budgetary pressure off, the credit assessor said the nation’s economy has improved from a “positive” outlook to a “stable” one.

“Concurrently, the removal of oil subsidies has alleviated budgetary spending pressures. Initially, these policy shifts posed inflationary risks, with, as a result, a potential for policy reversal,” Moody’s said in a statement on Friday. “These risks have now diminished, with inflation and domestic borrowing costs showing nascent signs of easing, giving us confidence that the policy changes are becoming more entrenched.”

Moody’s further commended Nigeria’s tax reform, which the company said “have started yielding results.”

“Although vulnerabilities related to oil prices and the exchange rate remain, Nigeria’s more robust buffers support a B3 rating,” Moody’s stated in its latest rating of Nigeria’s debt profile.

The credit rating is a key indicator of how likely a country or entity can repay its debt and Nigeria’s new B3 rating might inspire confidence for potential investors and lenders.

“The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely,” Moody’s said.

Minister of finance and coordinating minister of the economy, Wales Edun, commended President Bola Tinubu’s administration for implementing “tough but necessary” policies to improve the nation’s economy.

“Since taking office, the Tinubu-led administration has implemented tough but necessary policy measures to tackle long-standing economic challenges,” Mr Edun said in response to Nigeria’s new debt status.

Mr Tinubu, on Wednesday, sought the approval of the National Assembly to take a fresh loan of $21.5 billion, ¥15 billion and €65 million.