Lagos, Nigeria – May 5, 2024 – The global ratings agency Fitch revised the country’s outlook to “positive” from “stable” on Friday in a sign of growing confidence in Nigeria’s economic future. This upgrade follows a series of reforms implemented by President Bola Tinubu over the past year.
Tinubu’s economic agenda has focused on tackling inefficiencies and bolstering financial stability. Key measures include reducing expensive government subsidies on fuel and electricity, alongside a two-step devaluation of the naira currency. These steps aim to narrow the gap between the official exchange rate and the black market rate, promoting transparency and predictability in foreign exchange markets.
“The reforms undertaken have addressed distortions created by unconventional monetary and exchange rate policies of the past,” stated Fitch in a press release. This sentiment echoes revisions made by fellow ratings agencies Moody’s and S&P in 2023, who also acknowledged the potential benefits of Nigeria’s reform efforts.
Nigeria’s recent economic struggles have been well documented, with sluggish growth, limited access to US dollars, a growing national debt, and ongoing security concerns. However, Fitch’s upgrade suggests that these challenges may be on the mend.
The path forward is not without hurdles. Inflation remains stubbornly high, and the currency market is yet to fully stabilize. The Central Bank has responded by raising interest rates significantly this year, aiming to curb inflation and strengthen the financial system.
Despite these short-term challenges, Fitch’s positive outlook signifies a vote of confidence in Nigeria’s economic direction. The success of President Tinubu’s reforms will be crucial in determining the long-term sustainability of this positive trajectory. Although the country’s credit rating remains in “junk” territory at “B-“.
