By Abiola Olawale
Fitch Ratings has reaffirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’ with a Stable Outlook.
Fitch said the affirmation comes amid Nigeria’s ongoing battle against high inflation.
The country’s new economic status was reviewed in a report published on Friday.
According to the report, “Nigeria’s ‘B’ rating is due to its large economy, a relatively developed and liquid domestic debt market, large oil and gas reserves, and an improved monetary and exchange rate policy framework.”
The reports said formalisation of FX activity has improved the functioning of that market, resulting in higher FX liquidity and relative naira stability. The Central Bank of Nigeria (CBN) appears broadly committed to reforms to reduce market distortions and strengthen macroeconomic stability, but data transparency and quality concerns complicate progress toward a more predictable and credible policy framework.
The report reads in part: “We project inflation to fall from an average of 33% in 2024, to 21% in 2025 (though the lack of historical CPI data prevents a reliable assessment of inflation) and to 17% in 2027, still far above the projected ‘B’ median of 5% in 2027.
“We expect further cuts, although the central bank will move with caution to support the relative stability of the naira and sustain disinflation, while aiming to strengthen policy transmission through the use of open market operations.
“We project the current account surplus, which rose sharply to 6.8% of GDP in 2024 (from 1.3% of GDP), to narrow in 2025-2026, averaging 4.6% of GDP as modest growth in export receipts, strong remittances and gains from lower oil-related imports (reflecting higher domestic refining capacity) are offset by higher external interest payments and a recovery in non-oil imports (about 70% of imports).”
Fitch, in the report also forecasted that the budget deficit will widen in 2025-2026, averaging 3.1% of GDP due to higher expenditure, driven by higher wages, social and security expenses, debt servicing costs, and expenses ahead of the 2027 elections.
“We expect general government revenue to rise by 2.6pp to 12.4% of GDP in 2027, supported by new tax laws, effective 1 January 2026, that aim to reduce informality and leakages and lift tax collections, but this is far short of the government target for revenues of 16.2% of GDP in 2027 (from about 10% in 2024). Constraints, including administrative capacity gaps and enforcement challenges, mean revenue will remain well below the ‘B’ median of 17.8% and among the lowest of Fitch-rated sovereigns.
“We project a modest decline in 2026-2027 amid increased revenue, but for it to remain high, at 34% (B median 15%), with the federal government interest/federal government revenue ratio nearly 50%.
“We expect general government debt/GDP to decline marginally in 2025-2027, to 37% from 39% in 2024, below the ‘B’ median of 51%, as a result of strong nominal GDP growth.
“Nigeria’s public debt has a fairly long average maturity, of 10.9 years, over half of which is local-currency denominated (‘B’ median of 37%, including the 40-year debt security issued to the CBN to settle the Ways and Means facility). Banks’ ample liquidity and strong demand for government securities should support domestic financing capacity,” the report added.
