Fitch Ratings has upgraded Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’ with a stable outlook, citing recent policy reforms that have improved macroeconomic stability.
However, the credit rating agency warned that fiscal vulnerabilities remain a key risk to the country’s economic outlook.
In its latest rating action commentary released on Friday, Fitch acknowledged the Federal Government’s commitment to structural adjustments, including the removal of fuel subsidies, liberalisation of the exchange rate, and monetary tightening.
The agency noted that these reforms have enhanced policy credibility and supported a gradual recovery in investor confidence.
Fitch stated that the upgraded rating reflects Nigeria’s improved external liquidity position and progress in formalising foreign exchange inflows.
Net official FX receipts through the Central Bank of Nigeria and autonomous sources rose by 89 percent in the fourth quarter of 2024.
The agency expects continued FX market reform to support exchange rate stability, although moderate depreciation is anticipated in the near term.
Despite the positive momentum, Fitch flagged Nigeria’s rising external debt service and weak revenue base as major constraints.
External debt service is projected to increase from $4.7 billion in 2024 to $5.2 billion in 2025, including a $1.1 billion Eurobond maturity in November.
Debt service is expected to decline to $3.5 billion in 2026.
The agency noted that Nigeria’s debt burden is likely to remain stable at around 51 percent of GDP over the next two years.
However, limited revenue mobilisation will keep interest payments elevated. Fitch estimates that the general government interest-to-revenue ratio will average above 30 percent in 2025 and 2026, with the federal government’s ratio approaching 50 percent.
According to Fitch, the country’s revenue-to-GDP ratio is expected to rise modestly but remain structurally low, averaging 13.3 percent through 2026.
The agency warned that these fiscal challenges limit Nigeria’s ability to respond to economic shocks despite recent reforms.
Gross international reserves stood at $41 billion at the end of 2024 but fell to $38 billion following external debt repayments.
Fitch expects Nigeria’s reserves to average five months of current external payments in the medium term, above the median for similarly rated peers.
Inflation remains elevated but is forecast to ease to an average of 22 percent in 2025 following tighter monetary policy and improved FX liquidity.
Fitch said the stable outlook reflects Nigeria’s reform-driven gains balanced against persistent fiscal and external risks.
The agency warned that further delays in revenue reforms or a sharp decline in oil prices could weaken Nigeria’s external and fiscal metrics.
The latest assessment follows earlier projections by JP Morgan which warned that Nigeria’s current account could swing into deficit if oil prices remain subdued.
The investment bank also cautioned that the naira could depreciate beyond N1,700 per dollar in the absence of stronger FX inflows.
Nigeria spent a total of $5.47 billion on external debt servicing between January 2024 and February 2025 according to data from the Central Bank of Nigeria.
Domestic debt service for the year reached N13.12 trillion, exceeding the budgeted allocation of N12.3 trillion and representing a 68 percent increase over the previous year.
The 2025 federal budget has earmarked N16 trillion for debt servicing, underscoring the government’s anticipation of sustained debt obligations in the near term.
Fitch maintained that continued commitment to structural reforms particularly in revenue generation and fiscal discipline will be critical to sustaining the country’s credit profile and reducing vulnerability to external shocks.
