Fitch Ratings emphasizes the importance of ongoing foreign exchange reforms to attract foreign direct investment (FDI) and foreign portfolio investment (FPI) in Nigeria. The Director of Sovereigns at Fitch, Gaimin Nonyane, highlighted the need for these reforms to strengthen Nigeria’s current account and draw in foreign investments, despite improvements in oil refining capacity.
While Nigeria has implemented significant fiscal and monetary reforms to stabilize its macroeconomic environment, managing debt remains a challenge. Fitch projects a decline in debt costs but notes persistent fiscal challenges due to high interest-to-revenue ratios. The country’s FX reserves are expected to recover modestly, with Fitch emphasizing the importance of sustainable economic reforms to ease foreign currency supply constraints.
Despite facing inflationary pressures, Nigeria has made progress in exchange rate reforms, narrowing the gap between official and parallel market rates. Fitch commends Nigeria’s commitment to a more flexible exchange rate regime but stresses the need for the pace of reforms to stabilize the foreign exchange market.
Overall, Fitch affirmed Nigeria’s ‘B-‘ rating with a positive outlook, acknowledging the country’s key reforms in addressing macroeconomic instability. While Nigeria’s rating is supported by its large economy and oil reserves, constraints include weak governance indicators, dependency on hydrocarbons, and ongoing security challenges.
Regarding debt service costs, Nigeria saw a significant increase in servicing obligations in 2023, indicating the importance of sustainable financial management moving forward.