(Ecofin Agency) - President Bola Tinubu of Nigeria wasted no time in office, swiftly implementing a series of economic, political, and monetary reforms, including the removal of fuel subsidies. These measures are aimed at stabilizing the Nigerian economy.

U.S. rating agency Fitch Ratings reported last week an upward revision in Nigeria's long-term debt repayment capacity. From stable, the agency brought it to positive, assigning it a "B-" rating.

According to Fitch, this upgrade is attributed to the significant reforms undertaken by the Tinubu administration to stabilize the Nigerian economy, particularly in monetary and exchange rate frameworks, along with the reduction in fuel subsidies. These reforms have led to a resurgence of substantial foreign investment inflows and an appreciation of the naira in the official foreign exchange market.

"The CBN has stepped up efforts to reform the monetary and exchange rate framework following last year's unification of the multiple exchange rate windows, and the large differential between the official and parallel market rates has collapsed. Average daily FX turnover at the official FX window has risen sharply from 2H23, and there has been clearance of $4.5 billion of the backlog of unpaid FX forwards,” noted the agency.

However, Fitch emphasized that challenges persist, including high inflation, precarious stability in the foreign exchange market, and structural challenges such as the country's heavy reliance on hydrocarbons and relatively weak governance indicators.

It is worth recalling that since assuming office, the Nigerian head of state has initiated several economic, political, and monetary reforms, including the abolition of fuel subsidies. While hailed by Bretton Woods institutions, this decision has impacted household living conditions as prices of food, housing, water, electricity, gas, and other fuels continue to rise. Nevertheless, several government initiatives have been put in place to mitigate the effects of these reforms. Fitch Ratings forecasts a budget deficit of 4.5% in 2024 and 4.1% in 2025 due to improved non-oil revenues and partial removal of fuel subsidies.