Nigeria’s foreign exchange (FX) reserves are expected to decline to $47 billion by the end of 2026, according to Fitch Ratings, which highlighted persistent external pressures despite ongoing economic reforms aimed at stabilising the country’s financial system.
The rating agency, in a statement, affirmed Nigeria’s Long-Term Foreign Currency Issuer Default Rating at ‘B’ with a Stable Outlook, citing the country’s large economy, a relatively deep domestic debt market, and recent improvements in its monetary and exchange rate framework.
Fitch said gross external reserves have strengthened significantly in recent months, rising to $49.4 billion at the end of March 2026 from about $32 billion in April 2024. However, the agency expects a modest decline over the medium term, reflecting higher fiscal spending pressures and exposure to external risks.
“We forecast a marginal decline to $47 billion at end-2026,” Fitch said, noting that the projected level would still provide a buffer equivalent to about seven months of current external payments.
This remains above the median for countries in the same rating category, suggesting that reserve adequacy, while easing, is not an immediate concern.
Recent policy actions by the Central Bank of Nigeria (CBN) have supported greater stability in the foreign exchange market.
Reforms, including exchange rate liberalisation and tighter monetary policy, have contributed to improved liquidity and a more market-reflective pricing of the naira.
Even so, Fitch warned that vulnerabilities persist. Fiscal pressures, including a widening budget deficit and relatively weak government revenue, could weigh on the external position. The agency expects Nigeria’s fiscal deficit to approach 5 per cent of gross domestic product in 2026, while revenue is projected to remain low at around 11 per cent of GDP, fell below peers.
The country’s reserves have also shown signs of volatility in recent months. After climbing to a decade high of $50.45 billion in February 2026, reserves declined to about $48.85 billion in early April, underscoring concerns about the sustainability of recent gains.
The outlook for the naira remains closely tied to these dynamics. Fitch said continued external pressures could result in moderate currency depreciation in the near term, particularly if global conditions weaken or oil export earnings fall short of expectations.
Inflation, although easing, is expected to remain elevated. Fitch forecasts average inflation of about 16 per cent in 2026, down from 23 per cent in 2024, while economic growth is projected to hold steady at around 4.1 per cent, supported in part by expansion in the oil sector.
While the agency noted improvements in the banking sector, particularly following ongoing recapitalisation efforts, it said governance challenges continue to constrain Nigeria’s broader credit profile.
Overall, Fitch’s assessment points to a stabilising macroeconomic environment, but one still exposed to structural weaknesses and external shocks that could test the durability of recent reforms.
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