Fitch raises Nigeria’s credit rating to ‘B’ as reforms gain momentum
Fitch Ratings has upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating from ‘B-’ to ‘B’ and assigned a stable outlook to the country.
According to Fitch Ratings’ assessment published on its website on Friday, the upgrade reflects growing confidence in Nigeria’s commitment to broad policy reforms initiated since the shift to orthodox economic policies in June 2023.
These include exchange rate liberalisation, tighter monetary policy, efforts to end deficit monetisation, and the removal of fuel subsidies.
“These have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks,” Fitch added.
The global rating agency noted that the Stable Outlook reflects expectations that Nigeria’s macroeconomic policies will continue to improve the functioning of the foreign exchange market and support efforts to reduce inflation.
However, it added that inflation is likely to remain significantly higher than that of countries with similar credit ratings.
“Additionally, we anticipate a continued reduction in external vulnerabilities through further easing of domestic FC supply constraints, while renewed energy sector reforms should help sustain current account surpluses.
“Greater formalisation of FX activity including the Central Bank of Nigeria’s (CBN) recent introduction of an electronic FX matching platform and a new FX code to enhance transparency and efficiency, along with monetary policy tightening, has led to a greater rise in FX liquidity and general stability in the FX market after a 40 percent depreciation in 2024, closing the spread between the official and parallel exchange rates.
“Net official FX inflows through the CBN and autonomous sources rose by about 89 percent in 4Q24, compared to an eight percent rise in 4Q23. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term,” it added.
The CBN has tightened monetary conditions by raising the policy rate to 27.5%, an increase of 875 basis points since February 2024.
It has also employed prudential and operational tools—such as open market operations aligned with the Monetary Policy Rate —to enhance monetary policy transmission, following years of financial repression.
“Additionally, we anticipate a continued reduction in external vulnerabilities through further easing of domestic FC supply constraints, while renewed energy sector reforms should help sustain current account surpluses.
“Greater formalisation of FX activity including the Central Bank of Nigeria’s (CBN) recent introduction of an electronic FX matching platform and a new FX code to enhance transparency and efficiency, along with monetary policy tightening, has led to a greater rise in FX liquidity and general stability in the FX market after a 40 percent depreciation in 2024, closing the spread between the official and parallel exchange rates.
“Net official FX inflows through the CBN and autonomous sources rose by about 89 percent in 4Q24, compared to an eight percent rise in 4Q23. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term,” it added.
