Fitch Ratings Forecasts Decline in Nigeria's External Reserves to $47 Billion by 2026
In a recent projection, Fitch Ratings has indicated that Nigeria's foreign exchange reserves are likely to decrease to approximately $47 billion by the conclusion of 2026. This forecast is attributed to heightened spending pressures and various external risks that could impact the nation's economic stability.
Current Reserve Status and Historical Context
As of the end of March 2026, Nigeria's gross foreign exchange reserves stood at $49.4 billion, marking a significant increase from $32 billion recorded in mid-April 2024. The reserves reached a peak of $50.45 billion in February 2026, the highest level in over a decade, before experiencing a slight decline to $48.85 billion by April 9, 2026.
Despite the anticipated drop to $47 billion, Fitch emphasized that the reserves would still be sufficient to cover about seven months of external payments. This coverage is notably above the median of 4.3 months for countries in the 'B' rating category, where Nigeria's Long-Term Foreign Currency Issuer Default Rating remains affirmed with a Stable Outlook.
Economic Reforms and Challenges
Fitch acknowledged the positive impact of reforms implemented by the Central Bank of Nigeria (CBN), which have contributed to market stability and relative stability of the naira. However, the agency issued warnings regarding ongoing fiscal pressures and external vulnerabilities that could lead to modest currency depreciation in the near term.
On the fiscal front, Fitch expects Nigeria's budget deficit to widen to nearly five percent of GDP in 2026. Revenue is projected to rise only marginally to about 11 percent of GDP, which falls below the average for similarly rated nations. This scenario underscores the challenges in revenue mobilization and fiscal management.
Inflation and Growth Projections
Inflation in Nigeria is forecast to average 16 percent in 2026, a decrease from 23 percent in 2024. Meanwhile, real GDP growth is expected to remain steady at 4.1 percent, partly driven by performance in the oil sector. These economic indicators highlight a mixed outlook with improvements in some areas but persistent pressures in others.
Risks to Credit Profile
Fitch identified several key risks that continue to weigh on Nigeria's credit profile, including:
- Persistent inflation rates
- Weak revenue mobilization efforts
- Ongoing security challenges
- Governance concerns
These factors could potentially hinder economic progress and stability if not adequately addressed.
Contrasting Projections
It is noteworthy that the Central Bank of Nigeria has projected a more optimistic scenario, with reserves expected to reach $51.04 billion by the end of 2026. This divergence in forecasts between Fitch and the CBN highlights differing perspectives on Nigeria's economic trajectory and the effectiveness of current policies.
Overall, Fitch's analysis underscores the importance of monitoring Nigeria's external reserves and economic policies amidst global uncertainties and domestic challenges.
