Fitch Ratings says it expects the Central Bank of Nigeria (CBN) to adopt a cautious approach to monetary easing in 2026, noting that falling inflation across Sub-Saharan Africa (SSA) allows room for rate cuts but also presents risks if liquidity is not properly managed.
The agency made the projection 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 said.
Fitch maintained a neutral 2026 outlook for SSA sovereigns, citing stable economic growth and moderate inflation. It said ongoing reforms and better terms of trade are helping offset weaker external assistance and global volatility. However, heightened youth-led political activism and approaching elections in several countries could limit fiscal reforms.
The report noted that financing conditions have improved, as global interest rates and sovereign spreads continue to decline. Markets reopened in the second half of 2025 for low-rated African borrowers, offering refinancing opportunities ahead of significant 2026 maturities.
Fitch expects lower inflation to ease domestic borrowing costs, though it warned of vulnerabilities arising from “large and growing bank holdings of sovereign debt.”
Of the 21 rated SSA sovereigns, 15 are now on Stable Outlook — the highest since 2019. Cameroon and Rwanda remain on Negative Outlook, while none is on Positive Outlook for the first time since March 2022.
Fitch projects median GDP growth of 4.3% in 2026, with Uganda expected to lead due to oil production gains. Benin, Ethiopia and Rwanda are forecast to grow above 7%. Median inflation is expected at 4%, driven by subdued food and energy prices.
Commodity prices are expected to remain supportive, with Brent crude averaging $63 per barrel in 2026, down from $70 in 2025. Improved cocoa output in West Africa is also expected to boost revenues despite recent price drops.
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 may widen due to higher interest costs.
The agency noted that reform efforts have largely focused on revenue mobilisation and spending efficiency but warned that political pressure could slow progress. Elections scheduled for 2026 in Benin, Cabo Verde, Ethiopia, Republic of Congo, Uganda and Zambia are expected to bring policy continuity, though protests remain a risk.
Fitch said Nigeria’s elections, likely in early 2027, will be a key test of reform sustainability. While it expects major reforms to continue, it anticipates some fiscal easing, warning that managing liquidity to prevent renewed inflationary pressures “may prove challenging.”
Last month, the CBN held the Monetary Policy Rate (MPR) at 27%, maintaining its tight stance to curb inflation and stabilise the foreign exchange market. MPC members also voted to retain all key policy parameters as the bank seeks to restore confidence and rein in price pressures.
