Fitch Affirms Nigeria at ‘B’ with Stable Outlook
In its latest creditworthiness update, Fitch Ratings affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’, with a stable outlook.
Nigeria’s ‘B’ rating is supported by 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.
It noted, however, that the country’s credit rating is constrained by weak governance indicators, high hydrocarbon dependence, high inflation, security challenges and structurally very low, although improving, non-oil revenue.
Fitch said FX liquidity is improving, but challenges remain in the currency market, saying formalisation of FX activity has improved the functioning of that market, resulting in higher FX liquidity and relative naira stability.
The rating note reads that 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 reforms and greater exchange rate stability have supported a disinflation trend since April 2025, but inflation remains far above rating peers, at 20% in August 2025.
“We project inflation to fall from an average of 33% in 2024, to 21% in 2025 – though the lack of historical consumer price index data prevents a reliable assessment of inflation – and to 17% in 2027, still far above the projected ‘B’ median of 5% in 2027.
With real policy rates turning more positive, the CBN cut the rate by 50bp, to 27%, in September, the first cut since November 2020.
Ratings analysts 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.
Nigeria’s FX reserves rose to USD42 billion at the end of September, and analysts forecast a marginal decline to USD40 billion at the end of 2026, equivalent to 5.8 months of current external payments, exceeding the projected ‘B’ median of 4.2 months.
Fitch projects 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).
Official disclosure on the composition of the CBN foreign-currency balance sheet remains limited, but the CBN has made substantial progress in unwinding FX swaps with local banks. It estimates net reserves at USD23 billion at the end of 2024, up from about USD4 billion at end-2023.
Analysts estimate roughly 14% of gross reserves are backed by FX swaps with local banks, down from 25% in November 2024 assessment.
Fitch forecasts 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.
Structurally low revenue largely accounts for a high general government interest/revenue ratio, which ratings analysts expect to peak at 43% in 2025.
“We project a modest decline in 2026-2027 amid increased revenue, but for it to remain high, at 34%, with the federal government interest/federal government revenue ratio nearly 50%”.
Fitch expects 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 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.
Government external debt service is moderate but expected to rise to USD5.2 billion in 2025 (with USD3.1 billion of amortisations, including a USD1.1 billion Eurobond repayment due in November 2025), from USD4.6 billion in 2024, and fall to USD3.4 billion in 2026, before rising to USD5 billion in 2027.
Ratings analysts project external debt service/current external receipts to average 15% over 2025-2027, below the ‘B’ median of 19%.
“We forecast that real GDP growth will rise to 4.2% in 2025, from 4.1% in 2024. The relative stability in the FX market will support non-oil activity (about 96% of GDP), though high inflation and interest rates will constrain momentum.
“We expect the recovery in oil GDP to continue, with oil production (excluding condensates) averaging 1.5 million barrels per day (mbpd) in 2025, from 1.34mbpd in 2024.
“However, it will remain well below the 2019 level of 1.96mbpd, despite renewed energy reform efforts and increased investments by local oil companies, GDP was rebased in July 2025, increasing the nominal size by 43%”.
Fitch expects the banking sector’s impaired loan ratio which settled at 5.4% at end-May 2025 and provisions to rise as banks reclassify some large stage 2 loans as impaired following the expiry of longstanding system wide forbearance relating to the classification and provisioning of problem loans (notably oil and gas).
This, combined with the expiry of forbearance relating to single-obligor limit breaches, will exert pressure on capital adequacy ratios. Mitigants, including restructuring of many stage 2 loans and capital raisings ahead of new paid-in capital requirements, will enable most banks to exit forbearance by end-2025.
A few banks will be allowed to continue operating under forbearance, subject to certain penalties, including the inability to pay dividends, Fitch said. AIICO Delivers 182% Return to Investors, Targets N20bn Profit
