Nigeria’s external debt service is projected to rise to $5.2bn this year, highlighting growing pressure on public finances despite ongoing economic reforms, Fitch Ratings has said.
The credit rating agency disclosed this in its latest rating action commentary published on Friday, in which it upgraded Nigeria’s long-term foreign-currency issuer default rating to ‘B’ from ‘B-’, with a stable outlook.
According to the report, government external debt service will increase from $4.7bn in 2024 to $5.2bn in 2025.
This includes $4.5bn in amortisation payments and a $1.1bn Eurobond repayment due in November.
Fitch noted, “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 agency also cited a minor delay in the payment of a Eurobond coupon due on March 28, 2025, as a reflection of persistent challenges in public finance management.
Although Nigeria’s external debt service remains within manageable levels, Fitch warned that high-interest costs, weak revenue performance, and limited fiscal space remain significant concerns.
Fitch said general government debt was expected to remain at about 51 per cent of GDP in 2025 and 2026.
However, it expressed concern over the government’s revenue position, noting that interest payments will consume a substantial portion of income.
It stated, “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 agency observed that Nigeria’s gross reserves rose to $41bn at the end of 2024, before declining to $38bn due to debt service payments.
Despite this, Fitch 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.
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 commended the government’s commitment to economic reforms, including the removal of fuel subsidies, liberalisation of the exchange rate, and tightening of monetary policy.
It noted that these steps had improved policy credibility and strengthened Nigeria’s ability to absorb shocks.
However, the agency warned that risks to Nigeria’s external and fiscal position remained, particularly if oil prices fall or policy implementation slows down.
Fitch’s latest assessment comes amid earlier concerns raised by JP Morgan, which projected that Nigeria’s current account could swing into a deficit if oil prices stay low for a prolonged period, potentially pushing the naira beyond N1,700 per dollar.
Despite these challenges, Fitch maintained a stable outlook for the country, saying the reforms had begun to yield results.
It was earlier reported that Nigeria expended a total of $5.47bn on external debt servicing between January 2024 and February 2025, according to data from the Central Bank of Nigeria.
Also, Nigeria spent a total of N13.12 tn on debt servicing in 2024, representing a 68 per cent increase from the N7.8 tn recorded in the previous year, according to an analysis of data from the Debt Management Office.
The debt servicing costs recorded in 2024 surpassed the budgeted allocation of N12.3tn for the year.
The higher-than-expected expenditure highlights the increasing pressure of debt obligations on the nation’s fiscal sustainability.
For the 2025 budget, the Federal Government has earmarked N16tn for debt servicing, reflecting the government’s anticipation of continued debt-related expenses.
This development comes amid rising borrowing costs and an increasing debt burden, putting pressure on the country’s fiscal position.
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