Nigeria’s external debt servicing is projected to climb to $5.2 billion in 2025, as reported by Fitch Ratings in its latest commentary published on Friday.
The agency has upgraded Nigeria’s long-term foreign-currency issuer default rating to ‘B’ from ‘B-’, assigning a stable outlook to the country’s economic prospects.
According to Fitch, Nigeria’s external debt service will increase from $4.7 billion in 2024 to $5.2 billion in 2025, encompassing $4.5 billion in amortisation payments and a $1.1 billion Eurobond repayment due in November 2025, before dropping to $3.5 billion in 2026.
A minor delay in settling a Eurobond coupon payment due on March 28, 2025, underscores ongoing challenges in Nigeria’s public finance management.
Fitch forecasts that general government debt will hold steady at approximately 51% of GDP through 2025 and 2026.
However, the agency highlights concerns over Nigeria’s revenue position, predicting a structurally low revenue-to-GDP ratio averaging 13.3% during 2025–2026.
This weak revenue performance contributes to high interest payments, which are expected to exceed 30% of general government revenue and approach 50% of federal government revenue.
Nigeria’s gross reserves reached $41 billion by the end of 2024, though they are anticipated to decrease to $38 billion due to escalating debt service obligations.
Despite this decline, Fitch expects reserves to maintain an average coverage of five months of current external payments over the medium term, surpassing the median for similarly rated economies.
Recent economic reforms have spurred a significant rise in foreign exchange inflows, with net official FX inflows through the Central Bank of Nigeria (CBN) and autonomous sources surging by 89% in Q4 2024.
Fitch also notes improved monetary stability, projecting Nigeria’s inflation to average 22% in 2025.
The agency anticipates that continued formalisation of foreign exchange activity will bolster the exchange rate, though a modest depreciation is expected in the short term.
Nigeria’s government has demonstrated commitment to impactful economic reforms, including the elimination of fuel subsidies, exchange rate liberalisation, and monetary policy tightening.
These measures have enhanced policy credibility and fortified Nigeria’s resilience against economic shocks, according to Fitch.
Nevertheless, risks persist, particularly from potential declines in oil prices or delays in policy implementation, which could strain the country’s external and fiscal positions.
Fitch’s stable outlook reflects confidence that Nigeria’s reforms are beginning to produce tangible results despite these challenges.
The agency’s assessment aligns with broader economic concerns, such as those raised by JP Morgan, which warned that prolonged low oil prices could push Nigeria’s current account into a deficit and drive the naira beyond N1,700 per dollar.
These developments highlight the mounting pressure on Nigeria’s public finances, even as the government pursues reforms to address longstanding economic vulnerabilities.
