Fitch Ratings has affirmed Nigeria’s Long-term Foreign-Currency Issuer Default Rating at “B” with a Stable Outlook, citing a mix of improving macroeconomic reforms and persistent structural weaknesses in Africa’s most populous nation.
Essentially, the latest rating is Fitch’s judgement on how likely Nigeria is to meet its debt obligations that are denominated in foreign currencies like US dollars or euros, over an extended period.
In its latest review, the rating agency said Nigeria continues to benefit from a large and diversified economic base, a relatively developed domestic debt market, and significant oil and gas reserves.
It also acknowledged recent improvements in the monetary and exchange rate policy framework, particularly reforms introduced since mid-2023 aimed at stabilising the foreign exchange market and restoring investor confidence.
However, Fitch warned that these gains remain constrained by deep governance challenges, high dependence on hydrocarbons, elevated inflation, security risks, and persistently weak revenue generation compared to peer economies.
A key positive highlight in the report was the continued normalisation of the foreign exchange market. According to Fitch, recent Central Bank of Nigeria (CBN) measures, including the removal of restrictions on the repatriation of oil export proceeds by international oil companies, are expected to further improve FX liquidity and support relative naira stability.
The agency noted that the naira still experienced a significant 40 per cent depreciation in 2024, but said ongoing reforms should help reduce volatility, even though mild depreciation risks remain due to fiscal pressures and external shocks.
Besides, Fitch pointed to a strong improvement in external reserves, which rose to $49.4 billion at the end of March 2026, up from about $32 billion in April 2024. The agency projected a slight decline to $47 billion by end-2026, a $2.4 billion fall, but said reserve buffers remain comfortable, covering about seven months of external payments, well above the “B” median of 4.3 months.
It further noted improvements in Nigeria’s external position, including expectations that the current account surplus will widen in 2026, driven by higher hydrocarbon earnings, modest remittance inflows, and reduced fuel imports due to increased domestic refining capacity. These gains, it said, are expected to be partly offset by rising external debt servicing and recovering non-oil imports.
On fiscal performance, however, Fitch struck a more cautious tone, forecasting that Nigeria’s general government deficit will widen to nearly 5 per cent of Gross Domestic Product (GDP) in 2026, driven by higher spending on security, social interventions, and election-related expenditure ahead of the 2027 political cycle.
The ratings agency also noted that the newly approved federal budget raises total spending to about 14 per cent of GDP, with a significant portion allocated to capital projects, although execution risks remain high.
“The authorities have continued to build on reforms implemented since May 2023 to restore macroeconomic stability and enhance policy credibility. Recent measures by the Central Bank of Nigeria (CBN), including the removal of FX restrictions on the repatriation of oil export proceeds by international oil companies, should support further FX market normalisation, improve confidence and support relative naira stability after a 40 per cent depreciation in 2024.
“However, we expect modest depreciation in the near term amid rising fiscal pressures, as well as heightened external risks, while data quality concerns continue to weigh on policy credibility.
“Gross FX reserves rose to $49.4 billion at end-March 2026, from $32 billion in mid-April 2024, and we forecast a marginal decline to $47 billion at end-2026, reflecting higher spending pressures and external risks. However, we expect reserves to cover seven months of current external payments (CXP), well above the ‘B’ median of 4.3 months,” the ratings agency said.
But the budget deficit, Fitch said, will largely be financed domestically, with additional support from external borrowing, including a total return swap arrangement that could improve liquidity flexibility but introduces collateral-related risks.
On the revenue side, the agency highlighted Nigeria’s continued weakness, forecasting a modest rise in general government revenue to about 11 per cent of GDP in 2026. This, it stressed, would be supported by new tax laws which became effective from January 2026 and increased remittances from the Nigerian National Petroleum Company Limited (NNPC).
Fitch also flagged Nigeria’s high debt service burden. Although the country’s debt-to-GDP ratio remains moderate at about 38 per cent, below the peer median, interest payments continue to absorb a large share of revenue, it explained, with the interest-to-revenue ratio projected at around 33 per cent, far above comparable sovereigns.
Inflation, while easing from previous highs, Fitch said, still remains another key risk. The agency said consumer price growth has moderated since April 2025 but remains structurally high at about 15 per cent, with an average forecast of 16 per cent in 2026.
It warned that fiscal loosening ahead of elections or further fuel subsidy adjustments could reverse disinflation trends and force renewed monetary tightening by the CBN.
On growth, Fitch said it expects Nigeria’s economy to expand by about 4.1 per cent in 2026, driven by relative exchange rate stability and continued expansion in the oil sector. However, it cautioned that high inflation, energy price adjustments, and insecurity could weigh on non-oil growth.
The report also noted improvements in Nigeria’s banking sector resilience following recapitalisation requirements introduced by the CBN. Most banks, it highlighted, have met the new capital thresholds ahead of the March 2026 deadline, strengthening their ability to absorb shocks and support credit expansion.
Despite these improvements, Fitch maintained that Nigeria’s sovereign profile remains weighed down by weak governance indicators, reflected in low global rankings for institutional quality, rule of law, and corruption control.
The rating agency said Nigeria’s outlook could be upgraded if reforms deliver sustained disinflation, stronger fiscal performance, and improved revenue mobilisation. Conversely, it warned that policy inconsistency, renewed external financing stress, or a widening fiscal deficit could trigger a downgrade.
Emmanuel Addeh
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