Yemisi Izuora
Fitch Ratings has affirmed Nigeria’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘B’ with a stable outlook, reflecting Nigeria’s large economy, a relatively developed and liquid domestic debt market, large oil and gas reserves and an improved monetary and exchange rate policy framework.
Fitch, however added that Nigeria’s credit rating is constrained by weak governance indicators, high hydrocarbon dependence, high inflation, security challenges and structurally low revenue relative to peers.
Ratings analysts reaffirmed that the authorities have continued to build on reforms implemented since May 2023 to restore macroeconomic stability and enhance policy credibility.
Recent measures by the Central Bank of Nigeria (CBN), including the removal of FX restrictions on the repatriation of oil export proceeds by international oil companies, should support further normalisation of the FX market.
The move is expected to improve confidence and support relative naira stability after a 40 per cent depreciation in 2024.
However, Fitch analysts expect modest depreciation in the near term amid rising fiscal pressures and heightened external risks, while data quality concerns continue to weigh on policy credibility.
Fitch highlighted that Nigeria’s gross FX reserves rose to USD49.4 billion at end-March 2026, from USD32 billion in mid-April 2024, and forecast a marginal decline to USD47 billion at end-2026, reflecting higher spending pressures and external risks.
However, analysts expect Nigeria’s foreign reserves to cover 7 months of current external payments (CXP), well above the ‘B’ median of 4.3 months.
“We expect the current account surplus to widen in 2026, after narrowing modestly to 4.9% of GDP in 2025 as higher hydrocarbon receipts, modest remittances and gains from lower oil-related imports more than offset high external debt interest payments and a recovery in non-oil imports”, Fitch said.
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 USD35 billion at the end of 2025, up from about USD4 billion in 2023.
Ratings analysts said government external amortisations in 2026-2027 are moderate at USD4.6 billion or 1.2% of GDP relative to its FX reserves, with an international liquidity ratio expected to rise to 110% in 2027, from 63% in 2024, albeit still below the current ‘B’ median of 129%.
“We expect the government to meet its near-term external financing obligations with a combination of official and commercial borrowing”.
Fitch forecasts the general government (GG) budget deficit will widen to nearly 5% in 2026, driven by higher expenditure, including higher social and security outlays and election-related expenses.
Analysts noted that parliament has approved a revised 2026 federal budget that increases spending by nearly 3pp to about 14 per cent of GDP, with a large share allocated to capex, including rollovers from 2025, although Fitch expects capex execution will remain weak.
“Despite this, our spending forecast is much higher than the previous year”, Fitch said.
Ratings analysts said they assume the deficit will be financed mainly through domestic sources, while external financing is expected to include a total return swap.
The government expects the swap to be drawn in tranches, supporting financing flexibility, although its collateralised structure could pose additional risks.
Fitch forecasts general government revenue/GDP to rise by 0.8pp to about 11% in 2026, supported by new tax laws effective from 1 January 2026.
This includes higher oil and gas remittances from the Nigerian National Petroleum Company Limited, which analysts estimate will add about 0.3 per cent of GDP.
“We still expect revenue to remain well below the ‘B’ median of 17.4 per cent, and among the lowest of Fitch-rated sovereigns, reflecting structural constraints including continued underperformance in crude oil production, administrative capacity gaps and enforcement challenges”.
General government interest/revenue ratio is expected to decline in 2026-2027 amid increased revenue, but to remain high, averaging 33 per cent, with the federal government interest/federal government revenue ratio above 50 per cent.
Debt/GDP, which declined 0.7pp to 38 per cent in 2025, is expected to remain at a similar level in 2026.
Nigeria’s public debt has a long average maturity of 10.1 years, and over half is denominated in local currency. Banks’ ample liquidity and strong demand for government securities should support domestic financing capacity, Fitch said.
Nigeria economic insights
Ratings analysts noted that inflation has moderated since April 2025 supported by policy reforms, but remains structurally high, at 15 per cent yoy in February 2026.
“We expect inflation to average about 16 per cent in 2026, from 23 per cent in 2024, but to remain well above the ‘B’ median of 5.5 per cent’, Fitch said.
It will be recalled that the CBN began easing monetary policy in September 2025, cutting the policy rate twice by a total 100 basis points to 26.5 per cent after an extended tightening cycle.
However, a looser fiscal stance ahead of the general election scheduled in January 2027 or further fuel price increases could reverse disinflation and prompt renewed monetary tightening.
“ We forecast that real GDP growth will be broadly unchanged at 4.1 per cent in 2026. The relative stability in the FX market will support non-oil activity, although higher fuel prices could increase inflationary pressures and renew policy tightening, constraining non-oil GDP growth.
“A worsening domestic security situation could also undermine our baseline scenario. We expect oil GDP to continue to expand in 2026”.
In March 2024, the CBN announced a sharp rise in paid-in capital requirements for commercial, merchant and non-interest banks, effective from 31 March 2026. M&A activity was limited, with almost all banks complying by raising fresh core capital.
This has enabled many banks to absorb additional provisions and capital deductions associated with the expiry of longstanding regulatory forbearance relating to the classification and provisioning of problem loans, while remaining compliant with total capital adequacy requirements.