Fitch Upgrades Nigeria’s Sovereign Rating to ‘B’ Amid Positive Outlook on Energy Reforms and Current Account Stability

LAGOS, Nigeria — Global credit rating agency Fitch Ratings has upgraded Nigeria’s long-term foreign-currency Issuer Default Rating (IDR) from ‘B-’ to ‘B’ with a Stable Outlook, citing progress in macroeconomic reforms and energy sector transformation as key drivers behind the improved assessment.

The upgrade, disclosed in Fitch’s latest sovereign rating release, reflects a more optimistic stance on Nigeria’s ability to maintain external stability, supported by recent fiscal and structural reforms—particularly within the energy sector.

Energy Reforms and Renewables: A Catalyst for Surplus

Fitch pointed to Nigeria’s ongoing energy sector overhaul, including a growing commitment to renewable energy development and reforms in the oil and gas industry, as pivotal factors contributing to its sustained current account surplus outlook.

“We anticipate a continued reduction in external vulnerabilities through further easing of domestic foreign currency supply constraints, while renewed energy sector reforms should help sustain current account surpluses,” Fitch stated.

The agency acknowledged that despite prevailing global economic headwinds, Nigeria’s improving oil production and incremental export diversification are expected to help the country retain a positive external position over the medium term.

Structural Reforms Backed by Policy Overhauls

Fitch also highlighted key reforms enhancing Nigeria’s macroeconomic framework, including:

Exchange rate flexibility introduced by the Central Bank of Nigeria
The removal of fuel subsidies
Strategic investments in the renewables sector
Continued support for FX liberalisation and market-based reforms

These measures, according to Fitch, are reinforcing the country’s ability to withstand external shocks, while boosting investor confidence in its long-term economic trajectory.

A Contrast to JP Morgan’s More Cautious Tone

Fitch’s rating optimism comes in contrast to JP Morgan’s recent report on frontier markets, which issued a more cautious view on Nigeria’s external position. The U.S.-based investment bank warned that falling oil prices and new global trade risks—including steep tariffs imposed by the U.S.—could endanger Nigeria’s current account balance.

“If oil prices fall below Nigeria’s fiscal breakeven of $60 per barrel and stay there, the current account may swing into deficit,” JP Morgan noted, adding that the naira could depreciate to N1,700 per dollar in such a scenario.

Despite these warnings, Fitch’s analysis projects Nigeria’s current account surplus, estimated at 6.6% of GDP in 2024, to average 3.3% in 2025–2026, barring severe global shocks.

Risks Remain, But Outlook Holds Steady

While Fitch expressed confidence in Nigeria’s policy direction, it also warned of lingering downside risks, including:

Volatility in global oil markets
Reversal of capital inflows
Delays in structural reforms implementation
Weakened external demand

A reversal in reform momentum or worsening external conditions, the agency noted, could erode gains and put pressure on foreign reserves and fiscal buffers.

Still, Fitch emphasized that Nigeria’s improved macro policy mix and momentum in energy reforms provide a strong foundation for continued stability—especially if the current trajectory is maintained.

🇳🇬 Key Takeaways for Nigeria’s Economic Future

Fitch upgraded Nigeria’s sovereign rating to ‘B’ with a Stable Outlook, citing improved energy policy and economic management.
Current account surplus is expected to remain positive, supported by oil recovery and growing renewable energy investments.
Policy reforms, FX liberalisation, and subsidy removal are strengthening Nigeria’s external resilience.
Risks remain from global oil price declines and reform delays, but overall, the outlook for Nigeria is increasingly optimistic.

Conclusion

Fitch Ratings’ sovereign upgrade of Nigeria marks a vote of confidence in the country’s reform agenda—particularly in the energy sector. As long as policy consistency and global market stability hold, Nigeria appears poised to maintain external balance and unlock broader economic growth.

While challenges such as oil price fluctuations and capital market pressures remain on the horizon, the government’s commitment to restructuring and diversification provides a credible path forward for resilience and sustainability.