Fitch revises Nigeria’s outlook to positive, affirms at ‘B-’

Fitch Ratings has revised the outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at ‘B-’.

The revision of the outlook reflects a number of key rating drivers and their relative weights

Fitch noted that the positive outlook partly reflects reforms over the last year to support the restoration of macroeconomic stability and enhance policy coherence and credibility.

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It said exchange rate and monetary policy frameworks have been adjusted, fuel subsidies reduced, coordination between the Ministry of Finance and the Central Bank of Nigeria (CBN) improved, central bank financing of the government scaled back, and administrative efficiency measures are being taken to raise the currently low government revenue and oil production.

Fitch further noted that the reforms have reduced distortions stemming from previous unconventional monetary and exchange rate policies, resulting in the return of sizable inflows to the official foreign exchange (FX) market.

Nevertheless, Fitch sees significant short-term challenges. “Inflation is high, the FX market has yet to stabilise, and the durability of the commitment to reform is to be tested.”