In a rare boost for Nigeria’s economy, global ratings giant Fitch has upgraded the country’s credit outlook, shifting its long-term foreign-currency rating from a shaky ‘B-’ to a more stable ‘B’. Translation? Nigeria’s financial reputation is finally on the mend — and it’s all thanks to some bold, sweeping reforms.
This marks a vote of confidence in President Tinubu’s economic reset, which kicked off in June 2023 and has included moves like floating the naira, removing fuel subsidies, and tightening monetary policy to fight off runaway inflation.
“The upgrade reflects increased confidence in the government’s broad commitment to policy reforms,” said Fitch in its statement, highlighting a shift towards “orthodox economic policies” after years of volatility and mixed signals.
Why This Upgrade Matters:
The credit rating — officially called an Issuer Default Rating (IDR) — tells the world how likely a country is to pay back its debts. For Nigeria, this upgrade means better access to international loans, potentially at lower interest rates, and a stronger image in the eyes of foreign investors.
Reforms That Made It Happen:
Liberalised the exchange rate to reflect market realities.
Hiked policy rates to tackle inflation, bringing the benchmark to a steep 27.5%.
Phased out fuel subsidies, a politically risky move but one that’s eased the fiscal burden.
Improved transparency in FX markets through a new electronic matching platform and a clearer FX code.
These changes, Fitch said, have boosted investor confidence, stabilized the naira, and narrowed the gap between official and parallel FX rates — all vital for restoring macroeconomic balance.
Inflation Still Hot, but Cooling Slowly
Inflation remains a challenge, but Fitch predicts it will gradually ease, falling from 23.2% in early 2025 to 20% by 2026. That’s still high compared to Nigeria’s peers (the average is around 4.3%), but it’s progress.
However, the agency warns: don’t get comfortable too soon. Any early rollback on tight monetary policies could undo the gains.
Reserves Rebound, But Composition Unclear
Nigeria’s foreign reserves rebounded to $41 billion by late 2024 — a solid jump from the $32 billion mid-year slump. They’ve since dipped to $38 billion due to debt payments, but the net reserves are a more important figure — reportedly rising from just $4 billion to $23 billion.
Still, Fitch notes a lack of clarity in how those reserves are structured, especially with FX swaps now down to 14% of reserves, signaling an effort by the Central Bank to clean up the books.
Oil: A Cautious Comeback
The Dangote Refinery is ramping up, and crude production is expected to climb slightly — from 1.34 mbpd in 2024 to 1.43 mbpd in 2025–2026. But output still lags behind pre-2019 highs due to underinvestment and outages.
One bright spot? The U.S. trade spat has had minimal impact on Nigeria, thanks to oil accounting for 92% of exports to America — and oil was exempt from the tariffs.
The bigger threat, according to Fitch, is a drop in global oil prices, which could dent Nigeria’s reserves and shake the foundations of the new policy framework.
The Bigger Picture:
Despite the ongoing struggles with inflation, unemployment, and economic inequality, this ratings upgrade shows that the world is paying attention to Nigeria’s policy shift — and approving of its direction.
It’s not a cure-all, but it’s a sign that with the right reforms and political will, Nigeria can climb its way back to stability — and maybe even prosperity.
What To Watch For Next:
Will inflation actually fall as predicted?
Can Nigeria maintain tight monetary policies heading into 2026 elections?
Will the oil sector finally reach its potential with local players stepping up?
