Nigeria’s external debt servicing costs are projected to rise to $5.2 billion in 2025, according to a new report by Fitch Ratings, underscoring the mounting strain on the nation’s public finances despite the implementation of key economic reforms.
In its latest rating action commentary released on Friday, Fitch upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating from ‘B-’ to ‘B’, maintaining a stable outlook.
The agency forecasts that external debt service obligations will increase from $4.7 billion in 2024 to $5.2 billion in 2025, which includes $4.5 billion in amortisation payments and a $1.1 billion Eurobond repayment due in November 2025. Fitch anticipates a decline to $3.5 billion in 2026, reflecting a temporary easing of obligations.
Fitch also pointed out a minor delay in a Eurobond coupon payment originally due on March 28, 2025, as an indicator of the ongoing challenges in Nigeria’s public finance management.
High Debt Costs and Weak Revenue Performance Raise Concerns
While Nigeria’s current external debt servicing remains at a manageable level, Fitch warned of growing vulnerabilities due to high interest costs, limited fiscal space, and weak revenue performance. The agency projects that the general government debt will hover around 51% of GDP in 2025 and 2026.
A major concern is Nigeria’s low revenue-to-GDP ratio. Fitch estimates the government revenue-to-GDP ratio to average just 13.3% between 2025 and 2026. This low ratio contributes to a general government interest-to-revenue ratio exceeding 30%, while the federal government’s interest burden is projected to consume nearly 50% of its revenue.
Foreign Reserves and Inflation Outlook.
Fitch noted a rise in Nigeria’s gross foreign reserves, which climbed to $41 billion at the end of 2024 before dropping to $38 billion due to debt repayments. Despite the dip, Nigeria’s reserves are expected to cover about five months of current external payments, a figure that stands above the median for countries in the same rating category.
Additionally, recent economic reforms have improved foreign exchange inflows and contributed to greater monetary stability. According to the report, net official FX inflows through the Central Bank of Nigeria (CBN) and autonomous sources surged by 89% in Q4 2024. Although modest depreciation is expected in the short term, Fitch sees continued formalisation of FX activity as supportive of exchange rate stability. Inflation is projected to average 22% in 2025.
Reforms Boost Credibility But Risks Remain.
Fitch praised the Nigerian government’s reform agenda, which includes the removal of fuel subsidies, exchange rate liberalisation, and monetary policy tightening. These steps, the agency noted, have improved Nigeria’s policy credibility and enhanced its resilience to economic shocks.
However, Fitch cautioned that external and fiscal risks persist, particularly in the event of lower global oil prices or slower policy implementation.
These findings align with earlier concerns raised by JP Morgan, which warned that Nigeria’s current account could slide into a deficit if oil prices remain low for an extended period, potentially pushing the naira past N1,700/$1.
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Rising Debt Servicing Signals Fiscal Strain.
Data from the Central Bank of Nigeria shows that the country spent a total of $5.47 billion on external debt service between January 2024 and February 2025. In addition, according to figures from the Debt Management Office (DMO), Nigeria expended N13.12 trillion on overall debt servicing in 2024 — a significant 68% increase from N7.8 trillion in 2023. This amount exceeded the 2024 budgeted allocation of N12.3 trillion for debt servicing.Looking ahead, the Federal Government has earmarked N16 trillion for debt service in the 2025 budget, indicating an expectation of sustained high borrowing costs and a growing debt burden, further intensifying fiscal pressures.
