Agency cites rising foreign reserves, naira stability and economic reforms but warns that weak revenue, inflation and policy risks remain concerns……
Fitch Ratings has revised Nigeria’s long-term credit outlook from stable to positive, citing progress in economic reforms, stronger foreign exchange reserves and growing confidence that the current policy direction will be maintained ahead of the 2027 general elections.
In a statement on Friday, the international credit rating agency affirmed Nigeria’s long-term issuer default ratings (IDRs) at ‘B’, indicating that although the country remains exposed to significant credit risks, its economic outlook has improved.
Fitch said reforms to Nigeria’s monetary and foreign exchange systems had allowed greater flexibility in the naira, helped moderate inflation and accelerated the accumulation of external reserves beyond earlier expectations.
The agency added that improvements in the quality of reserves had strengthened the country’s ability to withstand external shocks, while continued reforms were expected to improve the effectiveness of monetary policy and 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.
However, the agency noted that persistent governance weaknesses, dependence on oil and gas, high inflation, security challenges and low government revenue compared with similarly rated countries continued to weigh on Nigeria’s credit standing.
Fitch attributed the positive outlook partly to expectations that the government would maintain its economic reform programme despite the approaching elections.
It noted that the ruling party’s control of a majority of Nigeria’s 36 states, alongside divisions within the opposition, could strengthen the incumbents’ chances of retaining power in the early 2027 elections.
Nevertheless, the agency warned that a significant reversal of reforms, looser fiscal policies, weaker capital inflows or severe social instability could undermine the improved assessment.
Foreign reserves rise to $54.9 billion
Nigeria’s external reserves have recorded substantial growth, rising to $54.9 billion as of September 25, 2026, from $32 billion in mid-April 2024, according to Fitch.
The agency attributed the increase to the formalisation of foreign exchange transactions, strong portfolio investments, higher export earnings and remittances.
Fitch projected that Nigeria’s current account surplus would expand to 6.4 per cent of gross domestic product (GDP) in 2026 before narrowing in 2027, as global oil prices are expected to decline to $70 per barrel from an estimated $87 per barrel in 2026.
It forecast that the country’s reserves would cover 6.3 months of current external payments by the end of 2026 and remain above the levels of comparable countries through 2027 and 2028.
However, the agency cautioned that large net errors and omissions in external accounts continued to create uncertainty around the country’s external position.
Fitch also expects the naira to trade broadly around its current level through the end of 2026, despite the prospect of lower oil prices over the following two years.
Inflation and oil production outlook
On inflation, the agency projected that Nigeria’s average annual rate would fall to 15.4 per cent in 2026, less than half the level recorded in 2024.
It attributed the anticipated moderation to relative naira stability and tight monetary policy, although inflation is still expected to remain significantly higher than the 5.6 per cent median for countries with a ‘B’ credit rating.
The agency also highlighted improvements in Nigeria’s oil production, reporting that crude output, excluding condensates, increased by 10 per cent quarter-on-quarter in the second quarter of 2026.
According to Fitch, production has met Nigeria’s OPEC target of 1.5 million barrels per day since May 2026, averaging 1.52 million barrels per day.
It expects output to remain around that level in the near term, supported by improved security and domestic investment, although production is still below pre-pandemic levels.
Fitch further noted that the ramp-up of the Dangote refinery and the rehabilitation of other facilities had reduced refined petroleum imports and demand for foreign exchange.
However, it warned that limited domestic crude supply would continue to leave the country partly dependent on imported crude.
Fiscal pressures remain a concern
Despite the improved credit outlook, Fitch expects Nigeria’s general government fiscal deficit to widen by 0.5 percentage points to 3.6 per cent of GDP in 2026, driven by higher spending on social programmes, security, personnel, capital projects and state governments.
The agency projected that ongoing tax reforms would raise non-oil revenue to 7.5 per cent of GDP, accounting for 66 per cent of total government revenue, through better tax administration, improved compliance and digitisation.
However, it cautioned that implementation challenges would continue to limit revenue growth, leaving general government revenue below the projected median of 19 per cent of GDP for countries rated ‘B’.
Fitch expects Nigeria’s government debt-to-GDP ratio to average 32 per cent between 2026 and 2028, down from 40 per cent in 2024, supported by strong nominal economic growth. The projected average is also below the 56 per cent median for countries in the same rating category.
Oyedele says positive outlook validates Tinubu’s reforms
Reacting to the rating decision, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the revision of Nigeria’s credit outlook from stable to positive validated the economic reforms introduced by President Bola Tinubu’s administration.
In a statement on Saturday, Oyedele said the government was working to place Nigeria firmly on the path towards investment-grade credit 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 remained higher than in comparable economies, while government revenue was low relative to the size of the economy and interest payments consumed a substantial share of available revenue.
“These are the constraints the Government’s reform programme is designed to address,” he added.
Oyedele reaffirmed the administration’s commitment to sustaining economic reforms, maintaining a disciplined and transparent foreign exchange regime, and increasing government revenue through the implementation of new tax laws and improved tax administration.
He said the government would also prioritise translating macroeconomic stability into broader economic benefits through food security, job creation, human development and support for small businesses.
