Standard and Poor's Ratings Services assigned a BB- long-term foreign currency and BB long-term local currency, and B short-term sovereign credit ratings to Nigeria. The outlook is stable. S&P's credit analyst Farouk Soussa said that the rating is supported by the country's improving fiscal management, movement toward an oil price-based fiscal rule, a program of reforms in government expenditure and the recent debt pardon by the 2005 Paris Club.

S&P observed that all this has resulted in Nigeria's budget achieving a surplus of more than 10% of GDP in 2005. S&P expects a budget surplus of 16% in 2006 and 17% in 2007. This has given the country greater fiscal flexibility than it has ever had in the past and has released resources for investment. The recent hike in oil prices has also led to current account surplus. However the ratings are constrained by Nigeria's relative political instability, high political risk and a short track record of orthodox economic policies and structural reform implementation.

S&P said that the underlying religious, ethnic and regional differences in Nigerian society, uncertainties surrounding the 2007 presidential elections, militia activity in the oil-producing Niger Delta, low levels of economic development due to years of under-investment during successive military dictatorships until 1999 also constrains the ratings.