Fitch revises Nigeria’s credit outlook to positive, says improved reserves strengthened economy’s resilience to shocks
Fitch Ratings has revised the outlook of Nigeria’s long-term
issuer default ratings (IDRs) to positive from stable and affirmed the IDRs at
‘B’.
In a statement on Friday, the agency said the outlook
revision reflects ongoing reform of the policy framework and its increased
confidence that momentum will not be disrupted by upcoming elections.
Fitch said monetary and exchange rate reforms have supported
greater naira flexibility, disinflation, and faster-than-expected accumulation
of foreign exchange (FX) reserves.
The agency said improved reserve quality has strengthened
the economy’s resilience to shocks, while continued reform implementation is
strengthening monetary policy transmission and should support further
disinflation.
“Nigeria’s ratings reflect its large economy, a relatively
developed and liquid domestic debt market, large oil and gas reserves and an
improved macroeconomic policy framework,” Fitch said.
According to the statement, the rating is constrained by
weak governance indicators, high hydrocarbon dependence, high inflation,
security challenges, and structurally low government revenue relative to peers.
Fitch said the positive outlook reflects expectations of
broad economic policy continuity, noting that the ruling party’s control of a
majority of Nigeria’s 36 states and a fragmented opposition position the
incumbents to win the early 2027 elections.
The agency warned that significant policy slippage,
including looser fiscal policy, weaker capital inflows or major social
instability, could undermine its assessment.
On external reserves, the agency said Nigeria’s gross FX
reserves rose to $54.9 billion as of September 25, 2026, from $32 billion in
mid-April 2024.
Fitch attributed the increase to greater formalisation of FX
transactions, strong portfolio inflows, higher export receipts and remittances.
“We forecast the current account surplus will widen to 6.4%
of GDP in 2026, but we expect it to narrow in 2027 amid our expectation that
global oil prices will fall to USD70/b from USD87/b in 2026,” the agency said.
“We expect reserve coverage to equal 6.3 months of current
external payments at end-2026, and remain above peers in 2027-2028, although
large net errors and omissions remain a source of uncertainty.”
The agency also expects the naira to trade broadly around
the current level through end-2026, despite the prospect of lower oil prices in
2027-2028.
On inflation, Fitch forecasts average annual inflation to
moderate to 15.4 percent in 2026, less than half its 2024 level, supported by
naira stability and tight monetary policy.
However, the projected rate remains above the 5.6 percent
median for countries rated ‘B’.
Fitch also highlighted improvements in oil production,
saying crude output, excluding condensates, rose 10 percent quarter-on-quarter
in the second quarter of 2026.
According to the agency, production has met Nigeria’s OPEC
target of 1.5 million barrels per day since May 2026, averaging 1.52 million
barrels per day.
“We expect production to remain around this level in the
near term, supported by improved security and domestic investment, but below
pre-pandemic levels,” the statement added.
“Dangote refinery’s ramp-up and rehabilitation of other
facilities leading to increased production of refined products has reduced
refined oil imports and FX demand, but limited domestic crude supply will
partly maintain reliance on imported crude.”
Despite the improved outlook, Fitch expects Nigeria’s
general government fiscal deficit to widen by 0.5 percentage points to 3.6
percent of GDP in 2026, driven by higher social, security, personnel, capital
expenditure and state spending.
The agency expects tax reforms to raise non-oil revenue to
7.5 percent of GDP, representing 66 percent of government revenue, through
improved administration, compliance and digitisation.
“Although implementation constraints will limit gains. GG
revenue/GDP will remain below the projected ‘B’ median of 19%,” the agency
added.
“GG debt/GDP will decline and average 32% in 2026-2028 (B’
median: 56%) from 40% in 2024, driven by strong nominal GDP growth.”
‘UPGRADE OF NIGERIA’S CREDIT OUTLOOK TO POSITIVE
VALIDATES TINUBU’S ECONOMIC REFORMS’
Reacting to the development, Taiwo Oyedele, minister of
finance and coordinating minister of the economy, said Fitch Ratings’ decision
to revise Nigeria’s credit outlook to positive from stable validates the
economic reforms introduced by President Bola Tinubu’s administration.
In a statement on Saturday, Oyedele said the government’s
ambition is to place Nigeria firmly on the path to investment-grade status.
“We are committed to this work, not for the rating itself,
but because these reforms will lower Nigeria’s cost of capital, crowd in
private investment and create decent jobs at scale,” he said.
The minister acknowledged that inflation remains above the
level in peer countries, government revenue is low relative to the size of the
economy, noting that interest payments consumed a significant share of revenue.
“These are the constraints the Government’s reform programme
is designed to address,” he added.
Oyedele reaffirmed the government’s commitment to sustaining
economic reforms, maintaining a disciplined and transparent foreign exchange
regime, and increasing revenue through the implementation of the new tax laws
and improved tax administration.
He said the administration would also focus on translating
macroeconomic stability into shared prosperity through food security, job
creation, human development and support for small businesses.
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