Citing Policy Reforms, Stronger External Buffers, Fitch Revises Nigeria’s Outlook to Positive, Affirms ‘B’ Rating

*Oyedele: Outlook further validates FG’s difficult but necessary reforms

Ndubuisi Francis in Abuja

Citing the federal government’s ongoing policy reforms and its increased confidence that the current momentum will not be disrupted by the general election due in early 2027, Fitch Ratings has revised the outlook for Nigeria’s Long-Term Issuer Default Ratings (IDRs) from Stable to Positive, affirming the rating at ‘B’.

The global ratings agency released its latest stance on the country at the weekend, underscoring key drivers behind its revision of Nigeria’s Outlook, including expected policy continuity; stronger external buffers; a restrictive monetary stance; reduced inflation; and higher oil production and refining capacity.

Reacting to Fitch’s positive outlook, the Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, reaffirmed the federal government’s resolve to sustain reform momentum and a disciplined, market-reflective, and transparent foreign exchange regime.

According to Fitch, the Outlook revision reflected ongoing reform of Nigeria’s policy framework and its increased confidence that the momentum will not be disrupted by upcoming elections.
It affirmed that the monetary and exchange rate reforms had supported greater naira flexibility, disinflation and faster-than-expected FX reserve accumulation, while improved reserve quality enhances resilience to shocks.

Fitch stressed that the continued reform implementation was strengthening monetary policy transmission and should support further disinflation, although inflation will remain well above Nigeria’s peers.
It said, “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.

“The rating is constrained by weak governance indicators, high hydrocarbon dependence, high inflation, security challenges and structurally low government revenue relative to peers.”
On the expected policy continuity metric, Fitch said, “The incumbents are well positioned to win the early 2027 elections due to the ruling party’s control of the majority of Nigeria’s 36 states and a fragmented opposition.

“As a result, we expect broad economic policy continuity, including in relation to reforms that have contributed to improved policy credibility, higher external liquidity and enhanced resilience to external shocks.
“Risks to our baseline stem from significant policy slippage, including fiscal loosening, weaker capital inflows or major social instability.”

It also observed that gross FX reserves rose to $54.9 billion on September 25, 2026, from $32 billion in mid-April 2024, supported by increased formalisation of FX transactions, strong portfolio inflows and higher export receipts and remittances.
“We forecast the current account surplus will widen to 6.4% of GDP in 2026, but we expect it to narrow in 2027 amid our expectation that global oil prices will fall to 70/barrel from 87/barrel in 2026,” Fitch said.

Providing more context, it pointed out that reserve quality had improved as the Central Bank of Nigeria (CBN) reduced its FX liabilities, with net FX reserves at $34.8 billion at the end of 2025 from about $4 billion at the end of 2023.
“We expect the naira to trade broadly around the current level through end-2026, despite the prospect of lower oil prices in 2027-2028,” it stressed.

On restrictive monetary stance and reduced inflation, Fitch viewed the CBN’s September policy adjustment as a calibrated easing consistent with improving policy transmission.

Fitch said it expected the CBN to remain cautious amid high food and fuel prices and external risks, while forecasting average annual inflation to moderate, due to naira stability and tight monetary policy, to 15.4 per cent in 2026, less than half the 2024 level, but well above the forecast ‘B’ median of 5.6 per cent.

On higher oil production and refining, Fitch noted that crude oil production, excluding condensates, rose 10 per cent quarter -on-quarter (Q-on-Q) in 2Q26 and has met Nigeria’s 1.5mbpd OPEC target since May 2026, averaging 1.52mbpd.
“We expect production to remain around this level in the near term, supported by improved security and domestic investment, but below pre-pandemic levels.

“Dangote refinery’s ramp-up and rehabilitation of other facilities leading to increased production of refined products has reduced refined oil imports and FX demand, but limited domestic crude supply will partly maintain reliance on imported crude, Fitch said.
Overall, Fitch noted that Nigeria has a low World Bank Governance Indicators (WBGI) ranking at the 20th percentile, reflecting weak institutional capacity, uneven application of the rule of law and a high level of corruption.
Despite Nigeria’s positive outlook, the ratings agency outlined downside risks or sensitivities that could individually or collectively lead to negative rating action/downgrade.

They include: A deterioration in the credibility and consistency of monetary and fiscal policymaking and FX management, resulting in renewed inflationary pressures and greater distortions in the FX market.
It also cited renewed external liquidity stress arising, for example, due to lower oil prices and more constrained external financing sources.

Fitch also cited sustained widening of the fiscal deficit, which significantly increases the debt/GDP burden and weakens financing prospects.

Oyedele: Outlook Further Validates FG’s Difficult But Necessary Reforms

Reacting to Fitch’s positive outlook, the Minister of Finance and Coordinating Minister of the Economy, Mr. Oyedele, reaffirmed the federal government’s determination to sustain its reform momentum and a disciplined, market-reflective, and transparent foreign exchange regime.

Oyedele said Fitch’s latest action followed positive rating actions by all three major international rating agencies on Nigeria in 2026, citing S&P Global Ratings, which upgraded Nigeria to ‘B’ from ‘B-‘ in May, and Moody’s Ratings, which revised its outlook to Positive in August.

He noted that separately, FTSE Russell returned Nigeria to Frontier Market status with effect from September 21, 2026, adding that taken together, these decisions reflected a converging and increasingly favourable assessment of Nigeria’s reform trajectory.
The minister explained that Fitch’s Positive Outlook further validated the difficult but necessary reforms implemented under the current administration, saying its medium-term ambition was to place Nigeria firmly on the path to investment grade.

Oyedele assured that the administration would, among other things, focus on raising revenue through full implementation of the new tax laws and efficient tax administration, and improve fiscal governance through spending efficiency, budget execution, and transparent debt management.

According to him, the government would pursue structural reforms that support non-oil growth and economic diversification and accelerate the conversion of macroeconomic stability into shared prosperity through food security, decent jobs, human development, and support for small businesses.