Federal Govt Eyes Investment Grade After Fitch, S&P, Moody’s Positive Ratings On Nigeria

The federal government has said its medium-term ambition is to place Nigeria on the path to investment-grade status, following positive rating actions on the country by Fitch Ratings, S&P Global Ratings and Moody’s Ratings in 2026.

Fitch Ratings has joined S&P Global Ratings and Moody’s Ratings in taking a positive rating action on Nigeria, revising the country’s outlook to Positive from Stable and affirming its Long-Term Issuer Default Ratings at ‘B’.

The federal government said the development puts Nigeria on course for an investment-grade rating, which it now has in sight.

Fitch announced the decision on Friday. A Positive Outlook means the rating could be raised if current trends are sustained.

The minister of finance and coordinating minister of the Economy, Taiwo Oyedele, said in Abuja on Saturday that the government’s medium-term ambition is to place Nigeria firmly on the path to investment grade.

He said the Fitch decision validates the reforms of the Tinubu administration, including the removal of the fuel subsidy, the unification of the exchange rate and the new tax laws.

According to Oyedele, the government is pursuing the reforms not for the rating itself, but because they will lower Nigeria’s cost of capital, attract private investment and create decent jobs at scale.

Third positive action this year

The minister said the Fitch action means all three major international rating agencies have now taken positive rating actions on Nigeria in 2026.

S&P upgraded Nigeria to ‘B’ from ‘B-’ in May, while Moody’s revised its outlook on the country to Positive in August.

Oyedele added that FTSE Russell returned Nigeria to Frontier Market status with effect from September 21, 2026. He said these decisions together reflect a converging and increasingly favourable view of the country’s reform path.

Fitch said the outlook revision reflects ongoing reform of the policy framework and its increased confidence that the momentum will not be disrupted by the elections due in early 2027.

It said monetary and exchange rate reforms have led to greater naira flexibility, disinflation and faster-than-expected accumulation of foreign exchange reserves.

Gross reserves rose to $54.9 billion on September 25, 2026, from $32 billion in mid-April 2024. Fitch attributed the increase to more formalised foreign exchange transactions, strong portfolio inflows, and higher export receipts and remittances.

The agency said reserve quality has also improved, as the Central Bank of Nigeria (CBN) has reduced its foreign exchange liabilities. It expects reserve cover to reach 6.3 months of current external payments by the end of 2026, though it noted that large net errors and omissions remain a source of uncertainty.

Fitch forecast that the current account surplus will widen to 6.4 per cent of GDP in 2026 but narrow in 2027, as it expects global oil prices to fall to $70 per barrel from $87 in 2026.

On the elections, it said the incumbents are well positioned to win in early 2027 because the ruling party controls most of the 36 states and the opposition is fragmented. It therefore expects broad continuity in economic policy. It named significant policy slippage, including fiscal loosening, weaker capital inflows and major social instability, as the main risks to that view.

Inflation, oil and growth

Fitch described the CBN’s September policy adjustment as a calibrated easing. It said the retention of the 45 per cent cash reserve requirement will continue to absorb naira liquidity and limit credit growth.

It forecast average inflation of 15.4 per cent in 2026, which is less than half the 2024 level but well above the projected ‘B’ median of 5.6 per cent. The agency expects the CBN to stay cautious because of high food and fuel prices and external risks.

On oil, Fitch said crude production, excluding condensates, rose 10 per cent quarter on quarter in the second quarter of 2026. Output has met Nigeria’s OPEC target of 1.5 million barrels per day since May, averaging 1.52 million barrels per day.

It said the ramp-up of the Dangote refinery and the rehabilitation of other facilities have reduced refined product imports and foreign exchange demand. It added that limited domestic crude supply means Nigeria will still partly rely on imported crude.

Fitch forecast real GDP growth of 4.3 per cent in 2026, up from 4 per cent in 2025, and expects growth to stay above 4 per cent in 2027 and 2028, led by non-oil activity.

Public finances and banks

On public finances, Fitch expects the general government deficit to widen by 0.5 percentage points to 3.6 per cent of GDP in 2026. It attributed this to higher social, security, personnel, capital and state spending.

It expects tax reforms to raise non-oil revenue to 7.5 per cent of GDP, or 66 per cent of government revenue, but said implementation constraints will limit the gains. Government revenue will remain below the projected ‘B’ median of 19 per cent of GDP.

The agency said interest costs will stay heavy. It expects the general government interest-to-revenue ratio to average 27 per cent over 2026 to 2028, against a ‘B’ median of 14 per cent, with the federal government’s ratio staying above 50 per cent.

General government debt is projected to average 32 per cent of GDP over the period, down from 40 per cent in 2024 and well below the ‘B’ median of 56 per cent.

Fitch said over 70 per cent of the 2026 borrowing target has been raised, mostly from domestic sources. It noted that the $5 billion total return swap facility, of which $1.5 billion has been drawn, adds a potential contingent liability and liquidity risk, but said this is presently limited by the small amount disbursed and by high reserves.

On banks, it said almost all lenders met the higher capital requirements introduced at the end of the first quarter of 2026 by raising fresh core capital. It estimated that many banks now have capital adequacy ratios above 20 per cent, against minimums of 15 per cent for internationally authorised banks and 10 per cent for others.

Constraints on the rating

Fitch said Nigeria’s ratings remain constrained by weak governance indicators, heavy dependence on hydrocarbons, high inflation, security challenges and low government revenue relative to peers. It noted that the country ranks in the 20th percentile of the World Bank’s governance indicators.

Oyedele acknowledged the areas where Fitch sees room for progress. He said inflation, although falling, remains above that of peer countries, government revenue is still low relative to the size of the economy, and interest costs take up a high share of that revenue.

He said these are the constraints the government’s reform programme is designed to address.

What could lift or lower the rating

Fitch said an upgrade could follow sustained disinflation and continued reform implementation, further strengthening of external reserves, and reforms that improve the transparency of public finances, including stronger mobilisation of non-oil revenue.

It said a downgrade could result from weaker credibility in monetary, fiscal and exchange rate policy, renewed external liquidity stress, or a sustained widening of the fiscal deficit that significantly raises the debt burden.

The minister said these triggers remain central to the administration’s economic strategy.

Government’s priorities

Oyedele listed the government’s priorities as:

sustaining reform momentum and a disciplined, market-reflective and transparent foreign exchange regime;

raising revenue through full implementation of the new tax laws and efficient tax administration;

improving fiscal governance through spending efficiency, budget execution and transparent debt management;

advancing structural reforms that support non-oil growth and diversification; and

converting macroeconomic stability into shared prosperity through food security, decent jobs, human development and support for small businesses.