A report by Fitch Ratings has projected that Nigeria’s external debt service may rise to $5.2 billion this year.
The credit rating agency disclosed this in its latest rating action commentary in which it also upgraded Nigeria’s long-term foreign-currency issuer default rating to ‘B’ from ‘B-’, with a stable outlook.
The report noted that government external debt service will increase from $4.7 billion in 2024 to $5.2 billion in 2025, indicating growing pressure on public finances despite ongoing economic reforms.
The external debt service 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,” the report read in part.
According to Fitch, a minor delay in the payment of a Eurobond coupon due on March 28, 2025, was a reflection of persistent challenges in public finance management.
It warned that although Nigeria’s external debt service remains within manageable levels, high-interest costs, weak revenue performance, and limited fiscal space remain significant concerns.
The agency further said general government debt was expected to remain at about 51 per cent of GDP in 2025 and 2026 but expressed concern over the government’s revenue position, noting that interest payments will consume a substantial portion of income.
“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,” it stated.
The agency further observed that Nigeria’s gross reserves rose to $41 billion at the end of 2024, before declining to $38 billion due to debt service payments.
Fitch said it expects the country’s reserves to average five months of current external payments over the medium term, above the median for similarly rated economies.
It added that recent policy reforms had contributed to increased foreign exchange inflows and better monetary stability, with inflation projected to average 22 per cent in 2025.
“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,” it added.
The agency commended the government’s commitment to economic reforms, including the removal of fuel subsidies, liberalisation of the exchange rate, and tightening of monetary policy, noting that these steps had improved policy credibility and strengthened Nigeria’s ability to absorb shocks.
It, however, warned that risks to Nigeria’s external and fiscal position remained, particularly if oil prices fall or policy implementation slows down.
