Economic Boost: Fitch Upgrades Nigeria's Outlook to Positive Amid Reforms

Fitch Ratings has upgraded Nigeria’s Long-Term Issuer Default Ratings (IDRs) outlook from Stable to Positive, while affirming the rating at ‘B’. This revision reflects the federal government's ongoing policy reforms and Fitch's increased confidence that the current reform momentum will not be derailed by the general election anticipated in early 2027. The global ratings agency, in its latest assessment, highlighted several key factors driving this positive shift, including expected policy continuity, strengthening external buffers, a restrictive monetary stance, a projected reduction in inflation, and enhanced oil production and refining capacity.

Reacting to Fitch’s assessment, Nigeria's Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, reiterated the federal government's commitment to sustaining its reform agenda and maintaining a disciplined, market-reflective, and transparent foreign exchange regime. Fitch noted that monetary and exchange rate reforms have successfully promoted greater naira flexibility, contributed to disinflation, and accelerated foreign exchange reserve accumulation beyond initial expectations. The improved quality of these reserves further bolsters Nigeria’s resilience against potential economic shocks.

The ratings agency emphasized that the consistent implementation of reforms is reinforcing monetary policy transmission, which should support further disinflation, although inflation levels are still expected to remain considerably higher than those of Nigeria’s peers. Fitch acknowledged Nigeria's large economy, its relatively well-developed and liquid domestic debt market, substantial oil and gas reserves, and an improved macroeconomic policy framework as foundational strengths for its ratings. However, the rating is concurrently constrained by persistent weak governance indicators, a significant dependence on hydrocarbons, high inflation, prevailing security challenges, and structurally low government revenue compared to other nations.

Regarding expected policy continuity, Fitch projected that the incumbent party is well-positioned to win the early 2027 elections, given its control over the majority of Nigeria's 36 states and a fragmented opposition. Consequently, the agency anticipates broad continuity in economic policies, particularly those reforms that have contributed to enhanced policy credibility, higher external liquidity, and improved resilience to external shocks. Despite this positive outlook, Fitch cautioned that significant policy slippage, such as fiscal loosening, weaker capital inflows, or major social instability, could pose risks to this baseline scenario.

Fitch also observed a substantial improvement in Nigeria’s external buffers, with gross foreign exchange reserves escalating to $54.9 billion by September 25, 2026, from $32 billion in mid-April 2024. This increase was attributed to the increased formalization of FX transactions, robust portfolio inflows, and higher export receipts and remittances. The current account surplus is forecasted to expand to 6.4% of GDP in 2026, though it is expected to narrow in 2027 due to an anticipated decline in global oil prices from $87/barrel in 2026 to $70/barrel. Furthermore, the quality of reserves has improved as the Central Bank of Nigeria (CBN) has reduced its FX liabilities, with net FX reserves reaching $34.8 billion at the end of 2025, a significant rise from approximately $4 billion at the end of 2023. The naira is expected to maintain its current trading level through the end of 2026, even with the prospect of lower oil prices in 2027-2028.

On the front of restrictive monetary stance and reduced inflation, Fitch viewed the CBN’s September policy adjustments as a calibrated easing consistent with improving policy transmission. The agency expects the CBN to sustain a cautious approach given high food and fuel prices and external risks. Average annual inflation is projected to moderate to 15.4% in 2026, less than half the 2024 level, due to naira stability and tight monetary policy, though it will remain well above the forecast ‘B’ median of 5.6%.

Regarding higher oil production and refining, Fitch noted that crude oil production, excluding condensates, increased by 10% quarter-on-quarter in 2Q26 and has consistently met Nigeria’s 1.5 million barrels per day (mbpd) OPEC target since May 2026, averaging 1.52mbpd. This production level is expected to be maintained in the near term, supported by enhanced security measures and domestic investment, albeit remaining below pre-pandemic figures. The ramp-up of the Dangote refinery and the rehabilitation of other facilities have boosted the production of refined products, thereby reducing refined oil imports and alleviating foreign exchange demand. However, limited domestic crude supply means Nigeria will partly continue to rely on imported crude.

Despite these positive developments, Fitch underscored Nigeria's low World Bank Governance Indicators (WBGI) ranking, placing it at the 20th percentile. This reflects inherent weaknesses in institutional capacity, inconsistent application of the rule of law, and a high level of corruption. The ratings agency also outlined potential downside risks that could lead to negative rating action, including a deterioration in the credibility and consistency of monetary and fiscal policymaking and foreign exchange management, leading to renewed inflationary pressures and distortions in the FX market. Other risks involve renewed external liquidity stress, possibly from lower oil prices or constrained external financing, and a sustained widening of the fiscal deficit, which could significantly increase the debt-to-GDP burden and weaken financing prospects.

Minister Oyedele further elaborated that Fitch’s positive outlook serves as additional validation for the difficult but essential reforms implemented by the current administration. He stated that the government's medium-term ambition is to firmly establish Nigeria on the path to achieving investment grade. The administration, he assured, will prioritize raising revenue through the full implementation of new tax laws and efficient tax administration, alongside improving fiscal governance via spending efficiency, budget execution, and transparent debt management. Furthermore, the government plans to pursue structural reforms aimed at fostering non-oil growth and economic diversification, accelerating the conversion of macroeconomic stability into shared prosperity through initiatives focused on food security, decent job creation, human development, and support for small businesses. He also mentioned that Fitch's action follows similar positive rating adjustments for Nigeria in 2026 from S&P Global Ratings and Moody's Ratings, and the return of Nigeria to Frontier Market status by FTSE Russell, collectively signaling an increasingly favorable assessment of Nigeria’s reform trajectory.