…says country’s economy remains strong

Moody’s Ratings has projected that Nigeria’s debt will decline to around 36% of Gross Domestic Product (GDP) in 2025, and that the country’s fiscal deficit will widen to 2.7 per cent.

In a commentary note released following the completion of its latest review of Nigeria’s economy, the credit rating said it expected newly approved tax reforms, going into effect in 2026, to gradually strengthen revenue mobilization over the medium term.

Moody’s, however, stated that Nigeria’s ratings reflected fiscal pressures arising from very limited revenue generation capacity, despite measures to improve tax collections, and weak debt affordability, notwithstanding a moderate debt burden.

According to the rating agency, very weak institutional and governance framework further constrains the country’s credit strength. “These challenges are balanced by the country’s large and diversified economy, underpinned by strong domestic demand potential, and more robust external buffers built over the past two years following the overhaul of foreignexchange management”, Moody’s said.

It emphasised that the Nigerian economy remained strong in 2025, with GDP growth near 4% in the first half of the year, broadly in line with 4.1% in 2024, despite subdued oil production.

As the agency put it, “output has increased to an average of 1.66 million barrels per day, up from 1.52 in the same period of last year, but still well below the 2.1 million medium-term target. “Inflation eased to 16.1 per cent in October, down from near 25 per cent in January.

In late September, the Central Bank of Nigeria cut its policy rate by 50 basis points to 27 per cent, signalling the start of a gradual easing cycle. “The naira has remained broadly stable following the 2023 foreign exchange reforms, and has appreciated by about seven per cent year-to-date through October, while the current account remains with a solid surplus.”

It noted that supported by a trade surplus, resilient oil earnings, strong capital inflows, and steady remittances, the country’s gross foreign exchange reserves have increased to $43.2 billion as of October, up by $2.3 billion year-to-date. “We expect external buffers to remain solid through 2025, with the current account surplus only slightly below last year’s level, around 6%, before narrowing in 2026 to 3.8 per cent under our assumption of oil prices averaging $60 per barrel,” Moody’s stated.

While noting that the Federal Government returned to the Eurobond market in November and that near-term financing still relies heavily on costly domestic borrowing, the rating agency predicted that “we project debt will decline to around 36 per cent of GDP in 2025, with the fiscal deficit widening to 2.7 per cent this year.”