Fitch Ratings has affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’ with a Stable Outlook, citing ongoing foreign exchange reforms, improved reserves, and a more credible monetary policy framework, while flagging persistent fiscal and structural risks.
This latest endorsement maintains Nigeria’s rating at ‘B’, a level it has held across recent reviews by Fitch Ratings, signalling relative stability in the country’s credit profile despite ongoing reforms and macroeconomic pressures. In its prior assessments, Fitch had retained a cautious stance, reflecting concerns around foreign exchange illiquidity, high inflation, and weak revenue performance.
In its latest assessment released on Friday, the agency said Nigeria’s rating reflects the strength of its large economy, sizeable oil and gas reserves, and a relatively developed domestic debt market. However, it noted that weak governance indicators, high inflation, security challenges, and structurally low government revenue continue to constrain the country’s credit profile.
CBN Reforms
Fitch said reforms introduced since 2023, particularly by the Central Bank of Nigeria, are supporting gradual normalisation of the foreign exchange market. Measures such as lifting restrictions on the repatriation of oil export proceeds by international oil companies are expected to boost investor confidence and stabilise the naira, following a sharp depreciation in 2024.
Despite these gains, the agency expects the currency to face modest pressure in the near term due to rising fiscal demands and external risks.
Fitch also highlighted the positive impact of banking sector reforms, noting that the recapitalisation drive led by the central bank has strengthened financial system resilience. Most banks have met new capital requirements through fresh equity injections, positioning them to support credit growth and absorb potential shocks.
However, governance remains a critical weakness. Nigeria scored poorly on key World Bank governance indicators, with Fitch citing concerns around institutional capacity, regulatory quality, and control of corruption as major constraints on the country’s rating.
FX Reserve
Nigeria’s external position has strengthened significantly, with gross foreign exchange reserves rising to $49.4 billion as of March 2026, up from $32 billion in April 2024. Fitch projects reserves could ease slightly to $47 billion by year-end but remain robust, covering about seven months of external payments—well above the peer average for similarly rated economies.
The current account surplus is also expected to widen in 2026, supported by stronger hydrocarbon receipts and reduced fuel imports due to increased domestic refining capacity.
Fiscal deficit and Inflation
On fiscal performance, Fitch warned that Nigeria’s budget deficit is likely to widen to nearly 5% of GDP in 2026, driven by increased spending, including security, social programmes, and election-related costs ahead of the 2027 general elections. While new tax measures and higher oil revenues may lift government income modestly to around 11% of GDP, this remains significantly below the peer median, underscoring structural weaknesses in revenue mobilisation.
Debt metrics remain relatively moderate, with public debt projected at about 38% of GDP—below the ‘B’ category median. However, the cost of servicing that debt remains elevated, with interest payments expected to consume more than half of federal government revenues.
Inflation, though easing, remains a key concern. Fitch expects average inflation to moderate to around 16% in 2026 from 23% in 2024, but still far above peer levels. The report cautioned that expansionary fiscal policy or further fuel price increases could reverse the disinflation trend and trigger tighter monetary policy.
GDP Project
Economic growth is projected to remain steady at about 4.1% in 2026, supported by improved foreign exchange stability and non-oil sector activity, although security risks and inflation pressures could weigh on the outlook.
Outlook Risk
Fitch said the Stable Outlook reflects a balance between ongoing reform efforts and persistent vulnerabilities. It warned that a deterioration in policy credibility, renewed foreign exchange instability, or a sustained widening of fiscal deficits could trigger a downgrade.
Conversely, stronger revenue mobilisation, improved governance, and sustained macroeconomic stability could support future rating upgrades.
