Nigeria’s external debt service is expected to increase to $5.2 billion in 2025, up from $4.7 billion in 2024, according to Fitch Ratings. The credit rating agency disclosed this in its latest rating action commentary released on Friday.
The projected 2025 figure includes $4.5 billion in amortisation payments and a $1.1 billion Eurobond repayment due in November. Fitch noted that although external debt service remains moderate, it reflects mounting pressure on Nigeria’s public finances.
The agency also referenced a recent minor delay in the payment of a Eurobond coupon due March 28, 2025, as indicative of ongoing challenges in public finance management.
Despite these concerns, Fitch upgraded Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’, maintaining a stable outlook. The agency credited this to the federal government’s economic reforms, including subsidy removal, exchange rate liberalisation, and tighter monetary policy—steps that have improved policy credibility and shock resilience.
However, Fitch highlighted persistent vulnerabilities such as high interest costs, weak revenue generation, and limited fiscal space. It projected general government debt to remain around 51% of GDP through 2025 and 2026. More critically, interest payments are expected to absorb a significant portion of government revenue.
“We expect general government revenue-to-GDP to rise but remain structurally low, averaging 13.3% in 2025–2026,” the report said. “This results in a high interest-to-revenue ratio—over 30% for general government, and nearly 50% for the federal government.”
The agency also reported that Nigeria’s gross reserves climbed to $41 billion at the end of 2024 before dropping to $38 billion, largely due to debt servicing. Nonetheless, reserves are projected to cover an average of five months of current external payments, which is above the median for countries with similar credit ratings.
Fitch further observed an 89% surge in net official and autonomous FX inflows in Q4 2024, driven by policy reforms that have improved foreign exchange supply and stability. While a modest depreciation of the naira is expected in the near term, continued formalisation of the FX market is seen as supportive of the exchange rate.
The agency cautioned that risks remain, particularly if oil prices decline or reform momentum weakens. It also echoed JP Morgan’s earlier warning that sustained low oil prices could push the naira past N1,700/$ and tip the current account into deficit.
Despite these risks, Fitch reaffirmed a stable outlook, noting that early signs suggest reforms are beginning to yield positive results.
