International credit rating firm Fitch Ratings has estimated that Nigeria’s budget shortfall will widen in 2025 and 2026, driven by surging public expenditure, election-related costs, and increasing debt-service payments. In its latest sovereign evaluation, Fitch retained Nigeria’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’ with a Stable Outlook, highlighting steady progress in reforms and better foreign exchange liquidity.
However, Fitch warned that persistent inflation, weak institutions, and poor revenue mobilisation continue to undermine Nigeria’s fiscal standing. The agency expects the Federal Government’s deficit to average 3.1% of GDP over 2025–2026, amid mounting expenditure pressures ahead of the 2027 general elections. The broader gap is linked to higher personnel costs, increased security and welfare spending, and growing interest obligations.
Government income is expected to rise moderately, climbing by 2.6 percentage points to 12.4% of GDP by 2027, driven by the enforcement of new tax laws effective January 2026. These measures are intended to enhance tax administration, reduce revenue leakages, and formalise the informal economy. Still, Fitch noted that revenue levels will remain below the government’s 16.2% target and the ‘B’ median of 17.8%, due to limited administrative efficiency and enforcement weaknesses.
Fitch’s model assigns Nigeria a ‘B-’ rating, balancing strengths such as a large domestic market, access to local financing, and vast oil and gas reserves against structural weaknesses like inflation, insecurity, and weak non-oil revenue. The agency commended the Central Bank of Nigeria (CBN) for continuing foreign exchange reforms that have improved liquidity and stabilised the naira. Nigeria’s foreign reserves increased to $42 billion as of September 2025, but are projected to ease to $40 billion by end-2026 as import demand expands.
Nigeria’s current account surplus rose sharply to 6.8% of GDP in 2024, from 1.3% in 2023, bolstered by stronger remittance inflows and reduced fuel imports following greater domestic refining capacity. Inflation has slowed considerably but remains high relative to peer economies. Fitch reported that inflation fell to 20% in August 2025, down from 33% in 2024, and is expected to drop further to 17% by 2027.
The CBN’s move to cut the Monetary Policy Rate by 50 basis points to 27% in September,the first in five years,was described as a measured effort to stimulate growth while safeguarding currency stability. Fitch foresees further rate cuts, though gradual, to support monetary transmission and maintain market stability.
Nigeria’s public debt is forecast to decline slightly to 37% of GDP by 2027, from 39% in 2024, supported by solid nominal growth and sustained access to domestic borrowing. Nonetheless, interest payments are projected to consume roughly 43% of government income in 2025, underscoring fiscal tightness.
The agency expects economic growth to reach 4.2% in 2025, up from 3.9% in 2024, helped by exchange rate stability, higher oil output, and gradual recovery in non-oil sectors. Oil production, excluding condensates, is anticipated to average 1.5 million barrels per day in 2025, up from 1.34 million in 2024, though still below pre-pandemic levels due to infrastructure decay and crude theft.
Fitch maintained Nigeria’s ESG Relevance Score at ‘5’, citing ongoing governance challenges, institutional weakness, and corruption risks. It said the outlook could improve if reforms that strengthen revenue mobilisation, reduce inflation, and enhance governance are sustained. Conversely, fiscal indiscipline or external liquidity pressures could trigger a downgrade.
Since 2023, Nigeria’s ‘B’ rating has reflected limited fiscal flexibility, high debt-service ratios, and fragile public finance management. While the Tinubu administration’s reforms,including fuel subsidy removal, currency unification, and new tax frameworks have helped stabilise key indicators, they have also intensified living costs, highlighting the need for stronger social protection and more decisive fiscal consolidation.
