Economy
Fitch affirms Nigeria at ‘B+’; projects inflation at 11% in 2019
Fitch Ratings Agency has affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Negative Outlook. According to a statement issued by the agency “Nigeria’s ratings are supported by its large and diversified economy, significant oil reserves, its net external creditor position, low external debt service ratio and large domestic debt market.
“These are balanced against relatively low per capita GDP, an exceptionally narrow fiscal revenue base and a weak business environment. The Negative Outlook reflects the downside risks from rising government indebtedness, and the possibility of a reversal of recent improvements in foreign currency liquidity and a faltering of the still fragile economic recovery. Fitch forecasts growth of 1.5 per cent in 2017 and 2.6 per cent in 2018, following Nigeria’s first contraction in 25 years in 2016. GDP growth continued to contract in first quarter of 2017, but by less than in the previous four quarters.
“The recovery will be driven mainly by increased FX availability to the non-oil economy and fiscal stimulus, as higher oil revenue and various funding initiatives have raised the government’s ability to execute on capital spending plans. However, the FX market remains far from fully transparent, domestic liquidity has also become a constraint, and the growth forecast is subject to downside risks. Inflation remains high at 16.1 per cent in July 2017, but Fitch projects it to decline to 11 per cent in 2019. Crude oil production rose to 1.8 million barrels per day (mbpd) in July 2017, from 1.5 mbpd in December 2016; the increase was driven by the lifting of force majeure at the Forcados export terminal and the completion of maintenance at both Forcados and the Bonga oil field. Fitch has revised down its expectation of full-year average production to 1.8 mbpd, which is about equal to 2016 production.
“Separately, Fitch notes that the imposition of an OPEC quota may cap Nigeria’s crude production at 1.8 mbpd, which could limit the oil sector’s upside potential. However, as it excludes condensate production, the quota should not affect Nigeria’s near-term production potential. In April 2017, the Central Bank of Nigeria (CBN) introduced the Investors & Exporters (I&E) currency window and gradually introduced further measures to improve the liquidity of this instrument. It also intervenes actively to support the currency while keeping domestic liquidity conditions tight. In addition, higher oil prices and increased portfolio and FDI inflows have enabled the CBN to increase its provision of FX liquidity to the market.
“As a result, the parallel exchange rate began to converge towards the I&E rate, currently at around N360 per dollar, and foreign currency liquidity shortages eased. Most activity now occurs on the I&E window, and Fitch believes that the I&E rate should now be considered the relevant exchange rate. Fitch forecasts the general government fiscal deficit to rise slightly to 4.5 per cent of GDP in 2017 from 4.4 per cent in 2016. Tax revenue in the first five months of 2017 underperformed budget expectations, as in 2015-16.
“The current Medium Term Expenditure Framework envisages a combined NGN3.5 trillion of capital expenditures in 2017 and 2018. In 2016, with a budget year that ran to May 2017 the government executed approximately N1.2 trillion of the N1.6 trillion forecast in the 2016 budget. Improved financing will see a stronger execution of capital expenditure plans in 2017 and subsequent years. As oil production rises and the overall economy recovers, Fitch expects that higher revenues will drive a narrowing of the general government deficit to 3.4 per cent in 2018. Nigeria’s general government debt stock is low at 17 per cent of GDP at end-2016, well below the ‘B’ median of 56 per cent of GDP, and Fitch expects only a moderate increase to 20 per cent of GDP at end-2017.
“However, low revenues present a risk to public debt sustainability. General government debt to revenue, at 297% at end-2016, is already above the ‘B’ category median of 227% and Fitch forecasts it to increase to 325% in 2017. The ratio is even higher at the federal government level. Nigeria’s current account surplus is expected to widen slightly to 1.0% of GDP in 2017, from 0.7% in 2016. Fitch expects exports to increase by about 30% in 2017 and an additional 10% in 2018, as oil production and prices increase. However, imports, which fell by over 30% in 2016, will also rise as dollar availability increases and the non-oil economy recovers.
“The international reserves position has increased to USD30.8 billion as of end-July 2017 and it will be bolstered by expected external financing flows. Part of the reserves may be encumbered in forward contracts. The economic contraction in 2016 and tight FX and naira liquidity weakened asset quality in the Nigerian banking sector. Non-performing loans rose to 12.8% at end-2016, up from 5.3% at end-2015. Rising impairment charges from bad loans have in turn led to capital adequacy ratios falling to 14.8% in 2016, from 16.1% at end-2015. The new FX window has aided FX liquidity for banks in 2017, but credit to the private sector (adjusted for FX valuation effects) is declining. Nigeria’s ratings are constrained by weak governance indicators, as measured by the World Bank, as well as low human development and business environment indicators and per capita income.”
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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