FITCH Ratings has raised Nigeria’s credit outlook to Positive from Stable, citing stronger foreign exchange (FX) reserves, economic reforms and easing inflation, while retaining the country’s long-term credit rating at ‘B’.
The rating agency announced the decision on October 9, 2026, in its latest rating action report, signalling improved confidence in Nigeria’s external financial position despite persistent fiscal challenges and expensive debt servicing.
The Positive outlook indicates that Nigeria could receive a rating upgrade if the improvement in its economic fundamentals and policy framework continues. However, the country’s existing rating remains unchanged.
Forex reserves strengthen Nigeria’s position
Fitch said Nigeria’s growing FX reserves had improved its capacity to withstand external shocks and meet international payment obligations.
Gross reserves increased to $54.9 billion as of September 25, 2026, from $32 billion in mid-April 2024. The agency attributed the growth to foreign portfolio investments, export earnings, remittances and increased formalisation of FX transactions.
It projected that Nigeria’s current account surplus would reach 6.4 percent of gross domestic product in 2026, while reserves would cover 6.3 months of current external payments by the end of the year.
Net FX reserves also strengthened, rising to $34.8 billion at the end of 2025 from about $4 billion in late 2023, reflecting a reduction in the Central Bank of Nigeria (CBN)’s FX liabilities.
READ ALSO: Fitch cuts Afreximbank to junk, ends rating coverage after dispute
The stronger external position has coincided with improved oil production and increased domestic refining capacity. Nigeria’s crude oil output, excluding condensates, averaged 1.52 million barrels per day in the second quarter (Q2) of 2026.
Fitch said the expansion of Dangote Petroleum Refinery and the rehabilitation of other domestic refineries had reduced the need for imported refined petroleum products, easing pressure on foreign exchange demand.
Growth expected to exceed 4%
The agency projected Nigeria’s economy would expand by 4.3 percent in 2026, compared with 4 percent in 2025. It expects growth to remain above 4 percent in both 2027 and 2028.
Average annual inflation is forecast to decline to 15.4 percent in 2026, less than half its 2024 level. Nevertheless, the projected rate remains substantially higher than the 5.6 percent median for countries carrying the same ‘B’ credit rating.
Fitch described the central bank’s September monetary policy adjustment as a measured easing of monetary conditions. However, it noted that maintaining the 45 percent cash reserve requirement would continue to restrict naira liquidity and constrain banks’ capacity to expand lending.
The agency warned that elevated food and fuel prices, further increases in petrol costs and security challenges could undermine household purchasing power and weaken economic growth.
Debt servicing remains a major weakness
Despite the improved outlook, Nigeria continues to face substantial fiscal constraints, particularly the large share of government revenue consumed by interest payments.
READ ALSO: Africa creates own credit agency to reshape continent’s borrowing costs
Fitch expects the general government fiscal deficit to widen to 3.6 percent of GDP in 2026 from 3.1 percent in 2025, partly because of increased public spending.
Tax reforms are expected to lift non-oil revenue to 7.5 percent of GDP, representing about 66 percent of government revenue. However, the agency cautioned that implementation challenges could prevent the country from achieving the full benefits of the reforms.
It projects that government interest payments will average 27 percent of revenue between 2026 and 2028, nearly twice the 14 percent median for countries rated ‘B’. The Federal Government’s interest-to-revenue ratio is expected to remain above 50 percent.
This means debt servicing will continue to limit the funds available for infrastructure, healthcare, education and other public services, even if revenue collection improves.
Fitch said sustained disinflation, stronger external reserves, continued reforms and higher non-oil revenue could support a future upgrade. Conversely, weakening policy credibility, renewed FX pressure, reduced access to external financing or a prolonged deterioration in public finances could lead to negative rating action.
Stronger reserves improve investor confidence
The rating decision comes as CBN Governor, Olayemi Cardoso, reported further growth in Nigeria’s FX buffers. He said gross reserves had reached $55 billion, while net reserves had risen to $46 billion.
Net reserves increased by $11.2 billion from $34.8 billion at the end of 2025. Unlike gross reserves, the net measure deducts near-term FX liabilities, including swaps and forward obligations, to provide a clearer picture of resources available to meet external commitments.
Cardoso said improved FX stability and stronger reserves were helping to rebuild investor confidence after the country’s previous currency crisis, when net reserves fell below $1 billion.
However, Fitch had also raised concerns in September about the transparency, liquidity and creditor-recovery risks associated with Nigeria’s use of total return swaps and repurchase agreements, including a proposed $5 billion total return swap facility with First Abu Dhabi Bank.
The latest rating shows that Nigeria has made progress in rebuilding its external buffers and improving macroeconomic conditions, but high debt-servicing costs and fiscal pressures remain significant obstacles.
For investors and lenders, the Positive outlook signals improving credit conditions, but any eventual upgrade will depend on whether the government can sustain reserve growth, strengthen revenue mobilisation and reduce the burden of interest payments on public finances.
