Fitch Ratings has observed that Nigeria’s ongoing reforms in the energy sector, including initiatives to expand renewable energy deployment, are likely to underpin a current account surplus over the medium term.
This perspective was shared in Fitch’s latest sovereign rating announcement, in which it upgraded Nigeria’s long-term foreign-currency Issuer Default Rating (IDR) from ‘B-’ to ‘B’, assigning a Stable Outlook.
The report stated, “We expect a continued reduction in external vulnerabilities, supported by easing constraints on domestic foreign currency supply. Simultaneously, renewed efforts to reform the energy sector are anticipated to underpin ongoing current account surpluses.”
According to Fitch, Nigeria’s external financial standing is likely to remain in positive territory despite adverse global conditions, aided by improved oil production and steady strides in diversifying the export base.
The rating agency further acknowledged that Nigeria’s dedication to reforming its energy industry—particularly the restructuring of the oil and gas sector, as well as increasing investment in renewable technologies—is a key driver of this improved external outlook. These developments, coupled with greater exchange rate flexibility and the withdrawal of fuel subsidies, are expected to support stronger macroeconomic fundamentals and enhance the country’s external buffers.
Fitch’s evaluation offers a more optimistic picture than JP Morgan’s recent analysis, which flagged potential dangers stemming from evolving global trade conditions. The American investment bank had previously expressed concerns that newly introduced tariffs by the United States, along with falling global oil prices, might jeopardise Nigeria’s current account balance.
JP Morgan warned that a persistent decline in oil prices below Nigeria’s fiscal breakeven point of $60 per barrel could shift the current account into deficit territory and cause the naira to weaken past N1,700 against the dollar.
“Even if Nigeria avoids a recession, a prolonged drop in oil prices beneath the $60/bbl threshold could tip the current account into deficit,” JP Morgan remarked in its latest report on frontier markets.
While Fitch offered a more tempered outlook regarding Nigeria’s external risks, it nonetheless projected some moderation in current account performance. “We estimate the current account surplus at 6.6% of GDP in 2024, and expect it to average around 3.3% of GDP across 2025 and 2026,” the report noted.
Fitch did caution that certain downside risks remain. These include potential vulnerabilities arising from continued declines in oil prices, abrupt reversals in capital flows, or delays in implementing crucial structural reforms. Should the global economic environment worsen, or Nigeria’s reform agenda lose momentum, the gains in the current account and international reserves could be eroded.
However, the rating agency concluded that Nigeria’s recalibrated macroeconomic policy mix, ongoing progress in foreign exchange liberalisation, and the breadth of energy sector reforms provide a solid foundation for sustaining external and fiscal improvements in the coming years.
With the upgrade from Fitch and its acknowledgement of reforms in the energy landscape, Nigeria’s outlook for maintaining external balance appears promising—so long as reform efforts persist and international market conditions remain reasonably favourable.