The rating is supported by its 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 Ratings has affirmed Nigeria?s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ?B?, with a stable outlook, describing it as both ?high and declining?

The country?s new economic status was reviewed in a report published on Friday.

According to the report, ?Nigeria?s ?B? rating is supported by its large economy, a relatively developed and liquid domestic debt market, large oil and gas reserves, and an improved monetary and exchange rate policy framework.?

It, however, added that the rating is constrained by weak governance indicators, high hydrocarbon dependence, high inflation, security challenges, and structurally very low, although improving, non-oil revenue.

Improved FX Liquidity, Challenges Remain

The reports said formalisation of FX activity has improved the functioning of that market, resulting in higher FX liquidity and relative naira stability. The Central Bank of Nigeria (CBN) appears broadly committed to reforms to reduce market distortions and strengthen macroeconomic stability, but data transparency and quality concerns complicate progress toward a more predictable and credible policy framework.

High But Declining Inflation

The reforms and greater exchange rate stability have supported a disinflation trend since April 2025, but inflation remains far above rating peers, at 20% in August 2025.

?We project inflation to fall from an average of 33% in 2024, to 21% in 2025 (though the lack of historical CPI data prevents a reliable assessment of inflation) and to 17% in 2027, still far above the projected ?B? median of 5% in

Policy Rate Cuts Started

With real policy rates turning more positive, the CBN cut the rate by 50bp, to 27%, in September, the first cut since November 2020.

?We expect further cuts, although the central bank will move with caution to support the relative stability of the naira and sustain disinflation, while aiming to strengthen policy transmission through the use of open market operations.?

External Buffers Above Peerse forecast a marginal decline to USD40 billion at end-2026, equivalent to 5.8 months of current external payments, exceeding the projected ?B? median of 4.2 months.

?We project the current account surplus, which rose sharply to 6.8% of GDP in 2024 (from 1.3% of GDP), to narrow in 2025-2026, averaging 4.6% of GDP as modest growth in export receipts, strong remittances and gains from lower oil-related imports (reflecting higher domestic refining capacity) are offset by higher external interest payments and a recovery in non-oil imports (about 70% of imports). ?

Reduced FX Liabilities

It 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 USD23 billion at end-2024, up from about USD4 billion at end-2023. We estimate roughly 14% of gross reserves are backed by FX swaps with local banks, down from 25% in our November 2024 assessment.

Fitch forecasts the budget deficit will widen in 2025-2026, averaging 3.1% of GDP due to higher expenditure, driven by higher wages, social and security expenses, debt servicing costs, and expenses ahead of the 2027 elections.

?We expect general government revenue to rise by 2.6pp to 12.4% of GDP in 2027, supported by new tax laws, effective 1 January 2026, that aim to reduce informality and leakages and lift tax collections, but this is far short of the government target for revenues of 16.2% of GDP in 2027 (from about 10% in 2024). Constraints, including administrative capacity gaps and enforcement challenges, mean revenue will remain well below the ?B? median of 17.8% and among the lowest of Fitch-rated sovereigns.?

High Interest/Revenue

Structurally low revenue largely accounts for a high general government interest/revenue ratio, which we expect to peak at 43% in 2025.

?We project a modest decline in 2026-2027 amid increased revenue, but for it to remain high, at 34% (B median 15%), with the federal government interest/federal government revenue ratio nearly 50%.

?We expect general government debt/GDP to decline marginally in 2025-2027, to 37% from 39% in 2024, below the ?B? median of 51%, as a result of strong nominal GDP growth.

?Nigeria?s public debt has a fairly long average maturity, of 10.9 years, over half of which is local-currency denominated (?B? median of 37%, including the 40-year debt security issued to the CBN to settle the Ways and Means facility). Banks? ample liquidity and strong demand for government securities should support domestic financing capacity.?

The report said government external debt service is moderate but expected to rise to USD5.2 billion in 2025 (with USD3.1 billion of amortisations, including a USD1.1 billion Eurobond repayment due in November 2025), from USD4.6 billion in 2024, and fall to USD3.4 billion in 2026, before rising to USD5 billion in 2027.

?We project external debt service/current external receipts to average 15% over 2025-2027, below the ?B? median of 19%.

?We forecast that real GDP growth will rise to 4.2% in 2025, from 4.1% in 2024. The relative stability in the FX market will support non-oil activity (about 96% of GDP), though high inflation and interest rates will constrain momentum.

?We expect the recovery in oil GDP to continue, with oil production (excluding condensates) averaging 1.5 million barrels per day (mbpd) in 2025, from 1.34mbpd in 2024. However, it will remain well below the 2019 level of 1.96mbpd, despite renewed energy reform efforts and increased investments by local oil companies. GDP was rebased in July 2025, increasing the nominal size by 43%.

Fitch expects the banking sector?s impaired loan ratio (end-May 2025: 5.4%) and provisions to rise as banks reclassify some large stage 2 loans as impaired following the expiry of longstanding systemwide forbearance relating to the classification and provisioning of problem loans (notably oil and gas).

?This, combined with the expiry of forbearance relating to single-obligor limit breaches, will exert pressure on capital adequacy ratios.

?Mitigants, including restructuring of many stage 2 loans and capital raisings ahead of new paid-in capital requirements, will enable most banks to exit forbearance by end-2025. A few banks will be allowed to continue operating under forbearance, subject to certain penalties, including the inability to pay dividends.

?Nigeria has an ESG Relevance Score of ?5? for Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Nigeria has a low ranking at the 19th percentile, reflecting weak institutional capacity, uneven application of the rule of law, and a high level of corruption, according to WBGI.? (Channels)

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