Fitch Ratings predicts Nigeria’s external debt service will reach $5.2 billion in 2025, a significant increase from $1.07 billion in 2024. A large share of this amount will be for loan repayments, including $1.1 billion due for a Eurobond. Despite financial challenges, Fitch has improved Nigeria’s credit rating from negative to stable, indicating a slight positive shift.
Fitch Ratings has forecasted that Nigeria’s external debt service will escalate to $5.2 billion in 2025. As reported by the Debt Management Office (DMO), Nigeria’s external debt service was recorded at $1.07 billion in December 2024. Fitch’s commentary, published on April 11, indicates that the service bill is expected to increase from $4.7 billion in 2024, with a notable component of $4.5 billion earmarked for repayments, including a $1.1 billion Eurobond due in November 2025.
This significant rise in debt service highlights Nigeria’s pressing financial obligations, as the projected $5.2 billion repayment in 2025 is nearly five times higher than the amount paid in the preceding year. A substantial portion of the total debt service will be allocated to principal repayment rather than merely servicing interest. Additionally, Fitch has noted delays in government payments, suggesting difficulties in fiscal management.
Over the next two years, the total government debt is expected to remain around 51% of Nigeria’s gross domestic product (GDP). This statistic implies that for every $100 produced by the economy, approximately $51 is owed by the government. Comparatively, Nigeria’s tax revenue is insufficient in relation to similar nations, causing about 30% of its collected funds to be directed toward interest payments on debt. Furthermore, nearly half of the federal government’s revenue is consumed solely by interest obligations.
Despite these financial hurdles, Fitch upgraded Nigeria’s credit rating from negative to stable, signaling a slight improvement in the country’s economic outlook.
In conclusion, Nigeria’s external debt service is set to rise significantly to $5.2 billion in 2025, reflecting serious fiscal challenges. A substantial portion of this debt pertains to loan principal repayments, presenting a strain on the nation’s finances. Furthermore, the government’s ongoing struggle with inadequate revenue generation exacerbates the situation, with a large fraction directed toward interest payments. However, the upgrade in credit rating offers a glimmer of hope amidst these economic difficulties.
Original Source: businessday.ng
