Fitch Ratings has projected that Nigeria’s external debt service obligations will rise to $5.2 billion in 2025 as the country continues to navigate mounting fiscal pressures despite ongoing structural reforms.
The global credit rating agency made this disclosure in its latest rating action commentary published on Friday.
Fitch upgraded Nigeria’s long-term foreign-currency issuer default rating from ‘B-’ to ‘B’ with a stable outlook, citing progress in macroeconomic policy reforms and improved external liquidity.
According to the report, Nigeria’s external debt repayment for 2025 includes $4.5 billion in amortisation payments and a $1.1 billion Eurobond maturity due in November.
This represents an increase from the $4.7 billion estimated for 2024. Debt service is expected to fall to $3.5 billion in 2026.
Fitch noted that while Nigeria’s external debt service levels remain moderate, rising obligations underscore growing pressure on public finances.
The agency flagged a recent minor delay in a Eurobond coupon payment due March 28 as indicative of lingering challenges in public finance management.
The agency also raised concerns around high-interest costs, weak revenue mobilisation and constrained fiscal space.
Federal government debt is projected to remain stable at approximately 51 percent of GDP through 2025 and 2026.
However, Fitch estimates that Nigeria’s general government revenue-to-GDP ratio will average 13.3 percent during the same period.
Interest payments are expected to consume over 30 percent of government revenue, with the federal government’s interest-to-revenue ratio nearing 50 percent.
Fitch described this as a key indicator of Nigeria’s limited fiscal flexibility.
Nigeria’s gross external reserves rose to $41 billion at the end of 2024 but declined to $38 billion following debt service payments.
Fitch expects reserves to average five months of current external payments in the medium term, slightly above the median for countries with similar credit ratings.
The agency acknowledged improvements in foreign exchange inflows and monetary stability following recent policy reforms.
These include the removal of fuel subsidies, exchange rate liberalisation, and tighter monetary policy.
Net foreign exchange inflows through the Central Bank of Nigeria and autonomous sources rose by 89 percent in Q4 2024.
Fitch stated that the government’s reform efforts have enhanced policy credibility and improved the country’s ability to absorb external shocks.
However, it cautioned that risks remain elevated, particularly if oil prices weaken or if reform implementation slows.
The agency maintained that a continued formalisation of FX markets will help stabilise the naira in the near term, although some depreciation is expected. Inflation is projected to average 22 percent in 2025.
The report also aligns with recent concerns from JP Morgan which warned that Nigeria’s current account could slip into a deficit if global oil prices decline for a prolonged period.
The investment bank warned that such a scenario could exert additional pressure on the naira, potentially pushing it beyond N1,700 per dollar.
Nigeria spent $5.47 billion on external debt servicing between January 2024 and February 2025, according to Central Bank data.
Additionally, total debt servicing rose to N13.12 trillion in 2024, up 68 percent from N7.8 trillion in the prior year, surpassing the initial budgeted allocation of N12.3 trillion.
The 2025 federal budget includes a debt servicing provision of N16 trillion, highlighting the scale of the government’s projected debt-related expenditures amid tightening borrowing conditions and revenue constraints.
Despite these challenges, Fitch affirmed a stable outlook for Nigeria, stating that recent reforms are beginning to yield results while improving the country’s medium-term fiscal and external resilience.
