Nigeria’s External Debt Service to Hit $5.2bn in 2025, Fitch Warns
Fitch Ratings has projected that Nigeria’s external debt servicing will rise to $5.2 billion in 2025, underscoring growing fiscal strain despite ongoing economic reforms.
The global credit rating agency disclosed this in a commentary released on Friday, in which it upgraded Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’, maintaining a stable outlook.
According to Fitch, Nigeria’s external debt service obligations will increase from $4.7 billion in 2024 to $5.2 billion in 2025. This includes $4.5 billion in amortisation payments and a $1.1 billion Eurobond maturity due in November 2025. The agency expects the figure to decline to $3.5 billion in 2026.
Fitch also flagged a recent delay in a Eurobond coupon payment due on March 28, 2025, as a reflection of ongoing challenges in Nigeria’s public financial management.
While the debt servicing levels are still considered manageable, Fitch cautioned that persistently high interest costs, weak revenue generation, and limited fiscal space remain major risks.
The agency estimates that general government debt will remain around 51% of GDP through 2025 and 2026. However, it raised concerns about Nigeria’s narrow revenue base, with interest payments projected to consume a significant share of government income.
“We expect general government revenue-to-GDP to rise but remain structurally low, averaging 13.3% in 2025–2026,” Fitch stated. “This will result in a high interest-to-revenue ratio above 30%, with the federal government’s ratio nearing 50%.”
Gross reserves increased to $41 billion by the end of 2024 but later dropped to $38 billion due to debt service payments. Despite the decline, Fitch projects that Nigeria’s reserves will continue to cover about five months of external payments — higher than the median for countries with similar credit ratings.
The agency credited recent reforms for improving monetary stability and boosting foreign exchange inflows. Inflation is expected to average 22% in 2025.
“Net official FX inflows through the CBN and autonomous sources rose by 89% in Q4 2024. Continued formalisation of FX activities is expected to support the naira, though slight depreciation is anticipated in the near term,” Fitch noted.
Fitch commended the government for policy measures such as fuel subsidy removal, exchange rate liberalisation, and tighter monetary policy, saying these steps had bolstered policy credibility and strengthened Nigeria’s capacity to absorb economic shocks.
However, the agency warned that risks remain—particularly if global oil prices fall or if reform momentum slows.
Fitch’s update comes as JP Morgan recently warned that Nigeria’s current account could slip into deficit if oil prices remain low for an extended period, potentially pushing the naira above ₦1,700 per dollar.
Despite these concerns, Fitch maintained a stable outlook, citing signs that the government’s reforms are beginning to yield positive results.
Meanwhile, data from the Central Bank of Nigeria (CBN) reveals that Nigeria spent $5.47 billion on external debt servicing between January 2024 and February 2025. Additionally, the Debt Management Office reported that ₦13.12 trillion was spent on debt servicing in 2024 — a 68% jump from ₦7.8 trillion in 2023, and higher than the ₦12.3 trillion initially budgeted.
For 2025, the Federal Government has allocated ₦16 trillion for debt servicing, reflecting expectations of continued high borrowing costs and mounting debt obligations.
These developments underscore growing pressure on the nation’s fiscal position amid rising debt servicing demands and a fragile revenue base.
