Fitch Ratings has affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’, with a stable outlook, citing the country’s large economy, developed domestic debt market, and significant oil and gas reserves as key supporting factors. The rating agency noted that while Nigeria’s economy is substantial, it is constrained by weak governance indicators, high dependence on hydrocarbons, elevated inflation, security challenges, and structurally low non-oil revenue.

According to the Fitch report, the formalization of foreign exchange activity has improved the functioning of the market, leading to higher FX liquidity and relative stability of the naira. The Central Bank of Nigeria’s commitment to reducing market distortions and strengthening macroeconomic stability is also seen as a positive step. However, data transparency and quality concerns may hinder progress towards a more predictable and credible policy framework.

Inflation remains a significant challenge, with the rate standing at 20% in August 2025, far above the median for ‘B’ rated peers. Fitch projects inflation to decline to 21% in 2025 and 17% in 2027, still above the projected ‘B’ median of 5% in 2027. The Central Bank of Nigeria has begun to cut policy rates, with a 50 basis point reduction to 27% in September, and further cuts are expected to support disinflation and stabilize the naira.

Nigeria’s external buffers are above those of its peers, with foreign exchange reserves rising to $42 billion at the end of September. The current account surplus is expected to narrow in 2025-2026, averaging 4.6% of GDP, due to higher external interest payments and a recovery in non-oil imports. The country’s general government debt-to-GDP ratio is forecast to decline marginally to 37% in 2025-2027, below the ‘B’ median of 51%.

Fitch expects real GDP growth to rise to 4.2% in 2025, driven by the relative stability in the FX market and a recovery in oil production. The banking sector’s impaired loan ratio is projected to rise as banks reclassify some large stage 2 loans as impaired, exerting pressure on capital adequacy ratios. However, mitigants such as restructuring and capital raisings are expected to enable most banks to exit forbearance by the end of 2025.

The affirming of Nigeria’s ‘B’ rating reflects the country’s significant economic challenges, including high inflation, weak governance, and security concerns. Despite these challenges, the stable outlook suggests that Fitch expects the country to maintain its current economic trajectory, with some progress towards addressing its structural weaknesses. As Nigeria continues to navigate its economic challenges, the stable outlook provides a degree of certainty for investors and stakeholders, highlighting the need for sustained efforts to strengthen the country’s economic fundamentals.