Leading rating agency, Fitch Ratings, has projected that Nigeria’s fiscal deficit will widen in 2025 and 2026 due to rising government expenditure, election-related spending, and growing debt-servicing obligations.
In its latest sovereign review of the nation’s budget, the rating agency affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’ with a Stable Outlook, hinging the latest ratings on ongoing economic reforms and improved foreign exchange (FX) liquidity.
Even then, it cautioned that persistent inflation, weak governance, and low revenue generation would continue to undermine Nigeria’s credit profile, thereby constraining the fiscal space needed for sustainable growth of the nation’s economy.
Fitch projected that the Federal Government’s budget deficit would average 3.1 per cent of Gross Domestic Product between 2025 and 2026 as spending pressures mount ahead of the 2027 general elections due to higher wage bills, increased social and security expenditures, and rising debt-servicing costs.
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Noting that though government revenue is estimated to increase by 2.6 percentage points to 12.4 per cent of Gross Domestic Product by 2027 given the potential of the new tax laws which implementation will kick off in January 2026, the rating agency stated that this figure remained fell short of the government’s target of 16.2 per cent and the ‘B’ sovereign median of 17.8 per cent.
It projected: “We expect general government revenue to rise by 2.6 percentage points to 12.4 per cent of Gross Domestic Product in 2027, supported by new tax laws effective January 1, 2026, aimed at reducing informality, curbing leakages, and improving tax collection.
“However, revenue will remain far below both the government’s target and the ‘B’ sovereign median, constrained by weak administrative capacity and enforcement challenges”, the rating agency added.
It linked the revenue gap to structural challenges, including weak tax administration, enforcement lapses, and the high level of informality in the economy.
In the latest report, Fitch, in its proprietary Sovereign Rating Model, assigned Nigeria a score equivalent to a ‘B-’ rating, indicating a balance between strengths, such as a large economy, a liquid domestic debt market, and significant oil and gas reserves and weaknesses, including high inflation, insecurity, and low non-oil revenue.
In addition, it commended the Central Bank of Nigeria (CBN) for its foreign exchange (FX) monetary reforms, which it noted had improved market liquidity and stabilised the Naira, with the foreign reserves rising to $42bn as of September 2025, above the median for comparable economies.
However, the rating agency projected a moderate decline to $40bn dollars by the end of 2026 as import demand increases.
Data from the apex bank indicated that Nigeria’s current account surplus expanded to 6.8 per cent of Gross Domestic Product in 2024 from 1.3 per cent in 2023, driven by stronger remittances and reduced refined fuel imports following higher local refining capacity.
Despite these encouraging indices, Fitch stressed that data transparency and reporting quality remained major risks to policy credibility.
While the nation’s inflation has eased to 20 per cent in August 2025 from an average of 33 per cent in 2024, the CPI remained among the highest for countries rated ‘B’.
Fitch projected the nation’s CPI to fall further to 17 per cent by 2027 if the current monetary and fiscal measures are sustained by the CBN and other relevant agencies.
