Fitch Ratings says it expects the Central Bank of Nigeria (CBN) to proceed carefully with its monetary easing cycle, highlighting that lower inflation across Sub-Saharan Africa (SSA) provides room for rate cuts but also poses risks if liquidity is not managed effectively.
The caution was issued in its ‘Sub-Saharan Africa Sovereigns Outlook 2026’ released on Monday.
“South Africa’s new inflation target is consistent with policy rate cuts, the Central Bank of Nigeria should continue to ease policy cautiously, and we see further cuts in Kenya and Ghana,” Fitch stated in its 2026 SSA sovereign outlook.
Neutral outlook for SSA sovereigns
The agency maintained a ‘neutral’ 2026 outlook for SSA sovereigns, citing stable growth and moderate inflation. Reform momentum and improving terms of trade are offsetting weaker external assistance and global volatility. However, Fitch warned that political activism among youth and upcoming elections in key countries remain constraints on fiscal adjustment.
Fitch noted that financing conditions look reasonable for the region, with global policy rates and spreads declining. Markets reopened in the second half of 2025 for low-rated borrowers, providing refinancing opportunities ahead of large maturities in 2026.
Lower inflation is expected to ease domestic financing costs, though Fitch flagged vulnerabilities from “large and growing bank holdings of sovereign debt.”
Rating outlook distribution
Out of 21 rated sovereigns, 15 are on Stable Outlook, the highest proportion since 2019. Two sovereigns — Cameroon and Rwanda — remain on Negative Outlook, while none are on Positive Outlook for the first time since March 2022.
Fitch projects median GDP growth at 4.3% in 2026, with Uganda leading due to oil production. Benin, Ethiopia, and Rwanda are expected to grow above 7%. Median inflation is forecast at 4%, reflecting subdued food and energy prices.
Commodity prices are expected to remain supportive, with Brent crude averaging USD63 per barrel in 2026, down from USD70 in 2025. Cocoa output improvements in West Africa should enhance revenues despite recent price declines.
Fiscal reform and debt management
Government debt-to-GDP ratios are projected to decline slightly, supported by fiscal consolidation and growth. Fitch expects a median primary surplus of 0.4% of GDP, though overall deficits will widen due to higher interest costs.
“Fiscal reform has focused on revenue mobilisation and spending efficiencies,” Fitch noted, while warning that reform fatigue and political pressures could derail progress.
Political and geopolitical risks
Elections in 2026 across Benin, Cabo Verde, Ethiopia, Republic of Congo, Uganda, and Zambia are expected to bring continuity in economic policy, though risks of protest remain. Fitch cautioned that excessive government responses could hurt concessional financing inflows.
Nigeria’s elections, likely in early 2027, will test the durability of reforms. Fitch assumes key reforms will hold but anticipates some fiscal easing, warning that “ensuring the liquidity generated does not feed into inflation may prove challenging.”
What you should know
Last month, the Central Bank of Nigeria (CBN) retained the Monetary Policy Rate (MPR) at 27%, maintaining its tight monetary stance as part of ongoing efforts to rein in inflation and stabilise the foreign exchange market.
- The decision was announced at the end of the Monetary Policy Committee (MPC) meeting, where members voted to keep key policy parameters unchanged.
- The MPR, which serves as the benchmark interest rate for the economy, has remained elevated as the CBN continues its aggressive measures to curb rising prices and restore investor confidence.
