Fitch Ratings has projected a sharp increase in Nigeria’s external debt service, expecting it to rise to $5.2 billion in 2025. This marks a significant jump from $1.07 billion in December 2024, according to the Debt Management Office (DMO). The rise is attributed to increased loan repayments, with $4.5 billion earmarked for amortizations, including a notable $1.1 billion Eurobond repayment due in November 2025. This projection follows a smaller increase from $4.7 billion in 2024, with a forecasted decrease to $3.5 billion in 2026.
The growing debt service bill is a major concern for the Nigerian government, as it struggles with its fiscal health. A substantial portion of the $5.2 billion in 2025 will be used to repay the principal of foreign loans rather than just the interest. Fitch’s commentary also highlighted a late payment in March 2025, indicating challenges in managing the country’s debt obligations. This delay raises concerns about Nigeria’s capacity to meet its future debt commitments.
Despite these financial pressures, Nigeria’s total government debt is expected to remain stable at around 51% of its Gross Domestic Product (GDP) over the next two years. This implies that for every $100 Nigeria’s economy generates, approximately $51 is owed by the government. The country’s tax revenue remains insufficient, with a significant portion of its income (about 30%) allocated to servicing its debt interest. For the federal government, almost half of its revenue is spent solely on interest payments.
While these financial challenges persist, there is a small positive development. Fitch upgraded Nigeria’s credit rating from negative to stable, signaling some improvement in the country’s financial management. However, the outlook remains cautious, given the heavy reliance on external debt and the need for better tax collection to reduce the strain on the economy.
Source: Business day