Fitch revises Nigeria’s outlook to positive on monetary, exchange rate reforms

Fitch Ratings, a leading provider of credit ratings, commentary and research for global capital markets, has revised the outlook on Nigeria’s long-term Issuer Default Ratings (IDR) to positive from stable, citing economic reforms that are yielding positive outcomes.

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The rating agency, in its rating action report issued on Friday and seen by PREMIUM TIMES, also affirmed the IDRs at ‘B’.

An IDR is a forward-looking view by Fitch Ratings on an entity’s relative vulnerability to default on its financial obligations.

‘B’ ratings imply that a material default risk exists, while the capacity for continued payment is prone to deterioration in the business and economic environment, even though there is a limited margin of safety.

“The outlook revision reflects ongoing reform of the policy framework and Fitch’s increased confidence that momentum will not be disrupted by upcoming elections,” Fitch said, alluding to the potential economic impact of Nigeria’s general elections coming up early next year.

“Monetary and exchange rate reforms have supported greater naira flexibility, disinflation and faster-than-expected FX reserve accumulation, while improved reserve quality enhances resilience to shocks,” it went further to say.

The rating agency’s outlook on Nigeria derived support from improvement in Nigeria’s external position, which saw gross FX reserves jump to $54.9 billion on 9 September 2026 from $32 billion in mid-April 2024, supported by higher formalisation of FX deals, robust portfolio inflows and increased export receipts and remittances.

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Fitch anticipates that reserve coverage will reach 6.3 months of current external payments by the end of this year and stay above peers in 2027-2028. Nevertheless, it noted that big net errors and omissions remain a source of uncertainty.

The rating agency also expects the naira to trade broadly around the current level through the end of this year, in spite of the likelihood of weaker oil prices in 2027-2028.

It believes sustained reform implementation is bolstering policy transmission and should aid further disinflation, much as inflation is expected to remain well above peers.

According to Fitch, Nigeria’s ratings are indicative of its big economy, comparatively developed and liquid local debt market, substantial oil & gas reserves and a stronger macroeconomic policy framework.

However, weak governance indicators, high hydrocarbon reliance, sticky inflation, security challenges and structurally low government revenue compared to peers are among major constraints.

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Fitch envisages broad economic policy continuity, including in relation to reforms that have contributed to higher policy credibility, increased external liquidity and improved resilience to external shocks, adding that the incumbents are on track to win the 2027 elections on account of the ruling party’s control of most of the states in the country.

It highlighted a restrictive monetary policy position, moderating inflation and higher oil production and refining output among key rating drivers.