Fitch upgrades Nigeria’s credit outlook to positive over reforms
TLDR
- Fitch upgrades Nigeria's credit rating from stable to positive due to reforms in forex, oil, and monetary sectors.
- Key reforms by the Federal Government include adjustments in exchange rates, reduction in fuel subsidies, and improved fiscal-monetary collaboration.
- Specific actions mentioned by Fitch involve exchange rate and monetary policy adjustments, reduced fuel subsidies, and enhanced fiscal-monetary coordination.
Fitch, a leading global credit ratings agency, has upgraded Nigeria's long-term credit default rating from stable to positive, attributing the improvement to significant reforms in various sectors over the past year.
The agency highlighted reforms in the foreign exchange market, oil industry, and monetary policy as key factors contributing to the upward revision. It praised the actions taken by the Federal Government to promote macroeconomic stability and enhance credibility.
Specific reforms mentioned by Fitch include adjustments in exchange rate and monetary policy frameworks, reduction in fuel subsidies, enhanced collaboration between fiscal and monetary authorities, and a decrease in Ways and Means borrowing, among others.
Key Takeaways
Last year, the global rating agency affirmed Nigeria’s credit outlook as stable, citing recent reforms initiated by President Tinubu upon assuming office. However, concerns were raised over the proposed $10 billion loan aimed at clearing the forex backlog. Six months after the last revision, the Federal Government and the central bank have implemented major policy reforms. During this period, the CBN successfully cleared the backlog of forex forwards, increased the Monetary Policy Rate (MPR) by 600 basis points, and raised capital requirements for banks across different tiers nationwide. Despite experiencing significant volatility in the forex market, there has been an increase in foreign inflows due to high rates of return. These developments reflect ongoing efforts to strengthen Nigeria’s economic fundamentals and enhance stability in the financial sector.
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