April 14, 2025/CSL Research
Global credit rating agency Fitch has upgraded Nigeria’s long-term foreign currency issuer default rating from “B-” to “B” and revised the outlook from positive to stable. The upgrade reflects growing confidence in the government’s commitment to comprehensive policy reforms.
Notable among these are the liberalisation of the exchange rate, a more restrictive monetary policy to rein in inflation, and the gradual elimination of fuel subsidies and deficit financing through the central bank. The shift to a stable outlook indicates Fitch’s expectation that the current macroeconomic policy trajectory will continue to improve the functioning of the foreign exchange market and support sustained disinflation.
We note that Fitch’s assessment broadly aligns with our view (see CSL Flash note; Nigeria: Navigating External and Domestic Headwinds, 28 March 2025), particularly regarding the improvement in Nigeria’s macroeconomic fundamentals compared to the previous year. This progress has been largely driven by reform measures implemented by the apex bank, which have helped strengthen policy credibility. However, near-term risks persist. The exchange rate remains volatile, and falling oil prices pose downside risks to both external balances and fiscal performance.
Regarding US tariffs, we share Fitch’s view that the impact on Nigeria will be limited. This is largely due to the exclusion of oil and gas exports – which make up over 90% of Nigeria’s total
exports to the US – from the baseline tariffs imposed by the US government. On the fiscal front, Fitch projects Nigeria’s fiscal deficit to average around 4.2% of GDP between 2025 and 2026. However, our estimates suggest the deficit could trend closer to 5% of GDP, reflecting significant implementation risks associated with non-oil revenue reforms. Moreover, the risk of fiscal slippages due to pre-election spending could further widen the deficit.
In another news, the Central Bank of Nigeria (CBN) reported a current account surplus of US$17.2 billion (9.2% of GDP) in 2024, a significant increase from the US$6.0 billion (1.7% of GDP) recorded in 2023. This strong performance was driven by a wider trade surplus, a smaller income account deficit, and higher remittance inflows. The trade balance grew by 63.5% year-on-year (y/y) to US$13.2 billion, supported by a 16.6% y/y decline in imports to US$39.8 billion. This decline was primarily due to reduced import demand following the currency devaluation. Meanwhile, exports fell by 5.1% y/y to US$53 billion, but the drop was more than offset by the sharper decline in imports. The income account deficit narrowed by 37.1% y/y to US$6.6 billion, likely due to lower dividend and interest payments to foreign oil companies. Turning to remittances, inflows remain strong, rising by 23.5% y/y to US$23.8 billion, helping the secondary income balance to close at US$24.0 billion. Looking ahead, we expect the current account surplus to moderate in the coming year, as lower oil prices are likely to weigh on the trade balance.
Click here to download full report: CSL Nigeria Daily – 14 April 2025 – Economy.pdf
