Fitch Ratings has changed Nigeria’s long-term foreign-currency rating from ‘B-’ to ‘B’ and moved the country’s credit outlook from Negative to Stable.
The upgrade, announced on Friday, comes after months of economic changes that started in June 2023.
Nigeria’s federal government began new economic steps last year, including allowing the naira to float more freely, increasing interest rates, stopping the printing of money to cover spending, and removing fuel subsidies.
Fitch said these changes have helped reduce financial instability and created more order in the economy.
The agency said these efforts have improved the country’s economic structure and made the system stronger against both local and international challenges.
They also expect these moves to slowly bring down inflation and help the naira trade more smoothly in the foreign exchange market. However, inflation is still expected to remain higher than in similar economies.
Fitch also pointed out progress in Nigeria’s foreign exchange market.
The Central Bank of Nigeria introduced a new digital matching platform and FX code, which has improved transparency.
Foreign exchange liquidity has gone up after the naira lost 40% of its value last year, bringing the official and black market rates closer together.
Foreign exchange inflows grew by 89% in the last quarter of 2024, compared to just 8% in the same period the year before.
While the naira may still weaken slightly, Fitch expects exchange rate movements to be more stable going forward.
In a bid to fight inflation, the Central Bank raised interest rates to 27.5% since February 2024, an increase of 875 basis points.
Fitch projected average inflation of 22% in 2025 and a drop to 20% in 2026. These figures remain high compared to the average inflation rate of other countries with the same rating level. Fitch warned that relaxing the monetary policy too soon could reverse the progress made so far.
Leave a Reply