(3 Minutes Read)
Fitch Ratings has upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating from ‘B-’ to ‘B’ with a Stable Outlook.
The upgrade signals growing confidence in the Nigerian government’s dedication to structural reforms since the adoption of more traditional economic policies in June 2023. These reforms include liberalizing the foreign exchange market, tightening monetary policy, discontinuing the monetisation of deficits, and phasing out fuel subsidies.
The Stable Outlook reflects Fitch’s belief that Nigeria’s current macroeconomic strategies will continue to improve the FX market’s functionality and help drive inflation lower, though inflation is still expected to remain elevated compared to similarly rated countries. The agency also foresees a steady reduction in external vulnerabilities, supported by improved domestic foreign currency supply and ongoing energy sector reforms that should maintain current account surpluses.
Fitch also noted improvements in transparency and efficiency in Nigeria’s FX market. They highlighted initiatives such as the Central Bank of Nigeria’s (CBN) launch of an electronic FX matching platform and a new FX code, both of which have enhanced formal FX activity. These efforts, alongside tighter monetary policies, have improved FX liquidity and helped stabilize the market after a sharp 40% naira depreciation in 2024. This also narrowed the gap between official and parallel market rates.
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Official FX inflows through the CBN and independent sources jumped by about 89% in Q4 2024, compared to only 8% growth in Q4 2023. Fitch expects this trend to continue, helping to stabilize the exchange rate, though a mild depreciation is still anticipated in the short term.
Regarding the recently imposed 14% U.S. tariff on Nigerian goods, Fitch said the impact on the economy would be limited.
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