Fitch Scores has upgraded Nigeria’s outlook to Secure from Adverse, highlighting renewed confidence within the Tinubu administration’s dedication to far-reaching coverage reforms.
Whereas Nigeria’s long-term overseas foreign money ranking stays at ‘B’, Fitch says the financial route taken since mid-2023 is beginning to bear fruit.
The reforms—change charge liberalisation, tighter financial coverage, removing of gasoline subsidies, and an finish to deficit monetisation—have improved macroeconomic credibility, diminished distortions, and enhanced resilience to shocks.
“We’re seeing clear indicators of elevated dedication to market-based reforms beneath President Tinubu’s administration,” Fitch acknowledged. “Whereas challenges stay, Nigeria’s trajectory has shifted towards stability and larger investor confidence.”
FX reforms stabilise market, although dangers stay
A key turning level was the Central Bank of Nigeria’s introduction of a brand new FX matching platform and FX code in 2024 to reinforce value discovery and transparency. Following a 40% naira depreciation final yr, these reforms helped slender the official-parallel market hole and boosted FX liquidity.
- Web FX inflows via official and autonomous channels surged by 89% in This autumn 2024, in comparison with an 8% rise the earlier yr. Nevertheless, Fitch expects modest depreciation within the brief time period, significantly as exterior dangers mount.
- Among the many most urgent is the newly introduced 14% U.S. tariff on Nigerian exports. Enterprise leaders such because the President of NACCIMA have warned that the tariff might considerably cut back FX inflows and worsen naira volatility. JPMorgan echoed related issues, warning buyers that the tariff—mixed with falling oil costs—might derail latest progress in change charge stability.
Inflation stays excessive regardless of tighter financial stance: Inflation cooled to 23.2% in February 2025 beneath a rebased CPI however stays properly above the ‘B’ ranking median of 4.3%. The CBN has responded with a cumulative 875 foundation level enhance in rates of interest since February 2024, bringing the coverage charge to 27.5%.
Fitch believes the CBN will keep away from prematurely easing charges, as financial stability is crucial to sustaining the positive factors from ongoing reforms. Inflation is projected to common 22% in 2025 and 20% in 2026.
Exterior reserves enhance, however buffers nonetheless fragile: Gross reserves climbed to $41 billion by end-2024, earlier than easing to $38 billion because of exterior debt servicing, together with a $1.1 billion Eurobond reimbursement due in November.
Nigeria’s present account recorded a $6.8 billion surplus in 2024 (6.6% of GDP), aided by FX formalisation and diminished import prices.
Web exterior reserves stand at about $23 billion, and the CBN has diminished its reliance on FX swaps, with such liabilities now simply 14% of gross reserves—down from 25% in November.
Refinery enlargement, oil output restoration supply assist: The Dangote Refinery is predicted to scale as much as 0.65 mbpd by mid-2025 from 0.55 mbpd presently, assembly home gasoline wants and lowering reliance on imports, which account for almost a 3rd of Nigeria’s items imports. Oil manufacturing (excluding condensates) is projected to rise to 1.43 mbpd in 2025, up from 1.34 mbpd, although nonetheless under pre-2019 ranges because of underinvestment.
Fiscal pressures persist, banking dangers develop: Regardless of efforts to spice up non-oil revenues, Fitch forecasts Nigeria’s fiscal deficit will common 4.2% of GDP in 2025–2026, pushed by rising wage payments, debt servicing, and pre-election spending.
Common authorities income stays structurally low, with interest-to-revenue ratios hovering round 30% (and almost 50% on the federal degree).
The banking sector additionally faces mounting strain. Non-performing loans stood at 4.9% in November 2024 and are anticipated to rise additional because of excessive inflation and elevated rates of interest. Although banking belongings are comparatively insulated, Fitch expects M&A exercise to speed up amongst smaller banks struggling to fulfill new capital thresholds.
Governance stays a drag on credit score profile: Fitch flagged weak institutional capability and governance as key constraints. Nigeria ranks within the nineteenth percentile of the World Bank Governance Indicators, reflecting ongoing challenges with corruption, regulatory enforcement, and the rule of regulation.
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