Fitch latest Ratings report has upgraded Nigeria’s Long-Term (LT) Foreign-Currency (FC) Issuer Default Rating (IDR) to ‘B’, from ‘B-‘ signifying a stable outlook due to the ongoing economic reforms.
According to Fitch, the upgrade reflects increased confidence in the government’s broad commitment to policy reforms implemented since its move to orthodox economic policies in JunFitch e 2023, including exchange rate liberalization, monetary policy tightening and steps to end deficit monetisation and remove fuel subsidies which have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks.
Fitch Predictions
Fitch expects that the macroeconomic policy stance will sustain improvements in the functioning of the FX market and support the move to lower inflation, although it will likely remain far higher than rating peers.
Additionally, it also anticipates a continued reduction in external vulnerabilities through further easing of domestic supply constraints, while renewed energy sector reforms should help sustain current account surpluses.
Regarding the exchange rate reforms and higher FX inflows, Fitch expects the greater rise in FX liquidity and general stability in the FX market after a 40% depreciation in 2024, typified by the closing of the spread between the official and parallel exchange rate to support the stability of the exchange rate, despite anticipated modest short term depreciation.
Fitch also projects inflation, which reached 23.2% year-on-year in February 2025 under the recently rebased CPI, to average 22% in 2025 (‘B’ median 4.3%) and 20% in 2026.
Increased Oil Production Capacity
Fitch also expects Nigeria’s oil refining capacity to increase in 2025 as the Dangote refinery scales up operations to reach 0.65 mbpd capacity by end-2Q25 from 0.55 mbpd currently. The refinery is currently operating at 85% of capacity and meets daily domestic consumption estimated at 50 million litres, helping to reduce oil-related import costs accounting for about 30% of goods imports.
crude oil production (excluding condensates) is expected to increase in 2025-2026, averaging 1.43 mbpd, from 1.34 mbpd in 2024, helped by improved onshore surveillance and increased investments by local oil companies. However, underinvestment and production outages is still expected to constrain oil production below 2019 levels.
Fitch forecasts that the country’s budget deficit will widen in 2025-2026, averaging 4.2% of GDP, even as revenue increases. Expenditure will be driven by higher wages, social and security expenses, debt servicing costs and election-related expenses ahead of the 2027 elections while general government (GG) revenue will be bolstered by non-oil tax revenue reforms although political challenges and high implementation risks may hinder progress.
Government debt/GDP ratio is expected to decline marginally in 2025-2026, to 51%, in line with the ‘B’ median due to strong nominal GDP growth. Government external debt servicing is expected to rise to USD5.2 billion in 2025 (with USD4.5 billion of amortisations, including a USD1.1 billion Eurobond repayment due in November 2025), from USD4.7 billion in 2024, and fall to USD3.5 billion in 2026.
Other Elements of the Report
Nigeria has an ESG Relevance Score (RS) of ‘5’ for Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption.
Nigeria has a low World Bank Governance Indicators (WBGI) ranking, at the 19th percentile, reflecting weak institutional capacity, uneven application of the rule of law and a high level of corruption.
The Country Ceiling for Nigeria is ‘B’ which reflects no material constraints and incentives, relative to the IDR, against capital or exchange controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.
