October 12, 2026/CSL Update
Fitch Ratings has revised its outlook on Nigeria to positive from stable, while affirming the “B” long-term issuer default rating. We note that the decision to review the outlook reflects the view that the ongoing policy reform momentum is unlikely to be derailed by the upcoming elections. In addition, Fitch welcomed the sustained monetary and exchange rate reforms, which have supported greater Naira flexibility, disinflation, and faster-than-expected reserve accumulation.
We broadly align with most of the views of Fitch. On the external account, we estimate that the current account could close the year around 6.4% of GDP, in line with the projections of Fitch, underpinned by expectation that elevated oil prices will continue to support the trade balance.
In relation to monetary policy and inflation, Fitch characterised the recent policy rate adjustment as a calibrated recalibration consistent with improving the monetary policy transmission mechanism, a view we share (see CSL Economics and Strategy: “MPC delivers shock rate cut”, 23 September). We also maintain that the apex bank is likely to remain cautious going forward, given elevated food and fuel prices and persistent external risks. On the political and fiscal outlook, Fitch noted that the incumbent is well positioned to retain power, which bodes well for policy continuity.
However, on the fiscal account, the deficit is expected to widen, consistent with our view that revenues are likely to underperform budget targets while expenditures are anticipated to remain sturdy.
On the outlook for future credit rating actions, Fitch highlighted that a deterioration in the credibility of monetary and fiscal policymaking, alongside renewed external risks and a sustained widening of the fiscal deficit that materially increases the debt ratio, could trigger a downgrade. However, we anticipate that macroeconomic conditions are likely to remain broadly favourable over the next couple of years, potentially bringing Nigeria closer to a sovereign rating upgrade.
We maintain our view that should an upgrade materialise over the coming months, it could serve as a meaningful catalyst for yield compression across the Nigerian Eurobond curve and broader market securities, helping to lower external borrowing costs and improve the terms on which both the sovereign and corporates can access international capital markets. The extent of any yield compression will nonetheless continue to depend on broader global risk sentiment, the trajectory of US Treasury yields, and overall demand for emerging and frontier market debt.
Click here to download full report: CSL Nigeria Daily – 12 October – Economy