Fitch Ratings has upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B’ from ‘B-‘, with a stable outlook.
The upgrade reflects increased confidence in the government’s commitment to policy reforms implemented since June 2023, including exchange rate liberalization, monetary policy tightening, and removal of fuel subsidies.
Key Highlights
- Improved Policy Coherence: The reforms have improved policy coherence and credibility, reducing economic distortions and near-term risks to macroeconomic stability.
- Stable Outlook: The stable outlook reflects Fitch’s expectation that the macroeconomic policy stance will support lower inflation and sustain improvements in the foreign exchange market.
- Inflation Projection: Fitch projects inflation to average 22% in 2025 and 20% in 2026, with a warning against premature easing of monetary policy.
- External Reserves: Nigeria’s external reserves have rebounded, reaching $41 billion by the end of 2024, but later declined to $38 billion due to increased debt service payments.
Economic Projections
- Oil Production: Fitch expects crude oil production to increase in 2025-2026, averaging 1.43 million barrels per day, helped by improved onshore surveillance and increased investments by local oil companies.
- Current Account Surplus: The current account surplus is projected to average 3.3% of GDP in 2025-2026, down from 6.6% in 2024.
- Gross Official Reserves: The reserves are expected to support the exchange rate, although modest depreciation is anticipated in the short term.
Challenges and Risks
- High Inflation: Inflation remains a challenge, with Fitch warning against premature easing of monetary policy.
- External Risks: Lower oil prices pose a bigger risk to Nigeria’s external buffers and fiscal metrics.
- Debt Service Payments: Government external debt service is expected to rise to $5.2 billion in 2025, with a significant portion going towards amortizations, including a $1.1 billion Eurobond repayment due in November 2025.