Nigeria’s external debt servicing obligations are set to rise to $5.2 billion in 2025, underlining the growing strain on public finances despite recent economic reforms aimed at stabilising the country’s fiscal position.
This projection was made by Fitch Ratings in its latest commentary following an upgrade of Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’ with a stable outlook.
According to the credit rating agency, the expected debt service burden includes $4.5 billion in amortisation and a significant $1.1 billion Eurobond repayment due in November 2025. The figure marks an increase from the $4.7 billion estimated for 2024, although a decline to $3.5 billion is projected in 2026, suggesting temporary relief in the medium term.
Fitch’s assessment noted ongoing concerns about Nigeria’s public finance management, including a recent delay in a Eurobond coupon payment originally due on March 28, 2025. While the delay did not trigger a default, it was seen as symptomatic of broader structural challenges facing the country’s fiscal operations.
Despite the manageable scale of Nigeria’s external debt service, Fitch warned of deeper underlying issues. These include high interest costs, chronically weak government revenues, and limited fiscal flexibility. The agency expects general government debt to remain around 51 per cent of GDP through 2025 and 2026, while expressing particular concern about the disproportionate share of revenue spent on interest payments.
Fitch projected that general government revenue would average 13.3 per cent of GDP across 2025 and 2026, an improvement, but still considered structurally low. As a result, the interest-to-revenue ratio is expected to remain elevated, exceeding 30 per cent at the general government level and nearing 50 per cent for the federal government alone. These figures highlight the vulnerability of Nigeria’s fiscal framework to rising debt costs and limited income generation capacity.
Gross external reserves, which reached $41 billion by the end of 2024, have since declined to $38 billion, largely due to debt service obligations. Nonetheless, Fitch expects reserves to average around five months’ worth of current external payments, which places Nigeria slightly above the median for economies with similar credit ratings.
The report acknowledged the positive impact of recent economic reforms, which have improved monetary stability and attracted greater foreign exchange inflows. These include the removal of fuel subsidies, liberalisation of the exchange rate regime, and tighter monetary policy.
During the fourth quarter of 2024, net official and autonomous foreign exchange inflows reportedly surged by 89 per cent, reflecting increased confidence in formal channels and improved market liquidity. Fitch anticipates continued inflows will support the naira, although it expects a modest depreciation in the short term.
Inflation, which has been persistently high, is projected to average 22 per cent in 2025, according to the agency’s estimates. While this figure remains elevated, it represents part of a gradual stabilisation expected under the current policy trajectory.
Despite the progress, Fitch emphasised that Nigeria’s external and fiscal positions remain susceptible to shocks. A sustained decline in global oil prices or any disruption in the reform momentum could reverse recent gains, placing further pressure on the country’s balance of payments and currency stability.
The warning echoes earlier concerns raised by JP Morgan, which projected that Nigeria’s current account could slide into a deficit if oil prices remain low for an extended period. In such a scenario, the investment bank warned, the naira could weaken beyond ₦1,700 per dollar, exacerbating inflation and undermining economic confidence.
Meanwhile, data from the Central Bank of Nigeria shows that the country spent a total of $5.47 billion on external debt servicing between January 2024 and February 2025. This figure underscores the increasing weight of debt obligations on Nigeria’s fiscal trajectory.
Further analysis from the Debt Management Office reveals that Nigeria’s total debt service cost for 2024 amounted to ₦13.12 trillion, a sharp 68 per cent increase from the ₦7.8 trillion recorded in the previous year. Notably, this exceeded the ₦12.3 trillion budgeted for debt service, highlighting the extent of the fiscal squeeze.
Looking ahead, the Federal Government has earmarked ₦16 trillion for debt servicing in the 2025 budget, reflecting expectations of continued borrowing costs and the country’s reliance on debt to fund fiscal operations.
As the government pushes forward with its reform agenda, the coming year is expected to test Nigeria’s ability to sustain fiscal discipline, maintain investor confidence, and avoid slipping deeper into a debt trap. Fitch’s stable outlook suggests cautious optimism but also a clear warning that policy implementation must remain on course.
