ABUJA, Nigeria (VOICE OF NAIJA)-Nigeria’s external debt service is projected to increase to $5.2 billion in 2025, underscoring mounting pressure on public finances despite ongoing reform efforts, according to Fitch Ratings.
The global credit rating agency revealed this in its latest commentary published Friday, where it upgraded Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’ with a stable outlook.
According to Fitch, the country’s external debt service burden is expected to rise from $4.7 billion in 2024 to $5.2 billion in 2025.
This projection includes $4.5 billion in amortisation payments and a $1.1 billion Eurobond repayment due in November.
“Government external debt service is moderate but expected to rise to $5.2bn in 2025 (with $4.5bn of amortisations, including a $1.1bn Eurobond repayment due in November 2025), from $4.7bn in 2024, and fall to $3.5bn in 2026,” Fitch stated.
The agency also pointed to a recent delay in the payment of a Eurobond coupon originally due on March 28, 2025, describing it as a sign of continuing challenges in public financial management.
While Fitch assessed Nigeria’s external debt service as manageable, it cautioned that persistently high interest costs, weak revenue mobilisation, and constrained fiscal space pose ongoing risks to the country’s financial stability.
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It projected general government debt to remain steady at around 51 percent of GDP through 2025 and 2026.
However, Fitch flagged concerns about revenue generation, highlighting that a large share of government income would go toward debt servicing.
“We expect general government revenue-to-GDP to rise but to remain structurally low (averaging 13.3 per cent in 2025–2026), largely accounting for a high general government interest/revenue ratio, above 30 per cent, with federal government interest/revenue ratio of nearly 50 per cent,” the report stated.
Fitch also noted that Nigeria’s gross reserves increased to $41 billion at the end of 2024, before dipping to $38 billion due to debt service payments.
Nonetheless, the agency anticipates reserves will average the equivalent of five months’ worth of current external payments in the medium term above the typical level for countries with similar credit ratings.
Fitch noted that recent policy reforms have led to increased foreign exchange inflows and improved monetary stability, with inflation expected to average 22 per cent in 2025.
Fitch stated, “Net official FX inflows through the CBN and autonomous sources rose by about 89 per cent in Q4 2024. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term.”
The agency praised the government’s efforts in pushing through key economic reforms such as fuel subsidy removal, exchange rate liberalisation, and tighter monetary policy measures.
It said these steps have boosted policy credibility and enhanced Nigeria’s capacity to withstand external shocks.
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Nonetheless, Fitch cautioned that vulnerabilities persist in Nigeria’s external and fiscal outlook, especially if oil prices decline or reform momentum weakens.
This latest assessment comes on the heels of concerns previously raised by JP Morgan, which warned that Nigeria’s current account could slip into deficit if oil prices remain subdued for an extended period, potentially driving the naira beyond N1,700 per dollar.
Despite these risks, Fitch maintained a stable outlook for Nigeria, noting that the reform agenda is beginning to yield tangible benefits.
Nigeria spent a total of $5.47 billion on external debt servicing between January 2024 and February 2025, according to data from the Central Bank of Nigeria.
Additionally, debt servicing costs for 2024 stood at N13.12 trillion marking a 68 per cent increase from the N7.8 trillion recorded in 2023, based on figures from the Debt Management Office.
The debt servicing expenditure in 2024 also surpassed the budgeted N12.3 trillion for the year, highlighting the increasing pressure of debt obligations on fiscal sustainability.
For the 2025 fiscal year, the Federal Government has allocated N16 trillion for debt servicing, reflecting expectations of continued debt-related expenses amid rising borrowing costs and an expanding debt burden.