Nigeria’s external debt service is expected to rise to $5.2 billion in 2025, marking a growing fiscal burden despite ongoing economic reforms, according to a new report by Fitch Ratings.
The credit rating agency made the projection in its latest commentary, which also saw Nigeria’s long-term foreign-currency issuer default rating upgraded from ‘B-’ to ‘B’ with a stable outlook. The agency attributed the anticipated rise in external debt servicing to scheduled amortisation payments and a $1.1 billion Eurobond repayment due in November 2025.
Debt service obligations are expected to rise from $4.7 billion in 2024, and then decline to $3.5 billion by 2026, reflecting a temporary peak in the near term.
Rising Costs, Limited Revenue Space
Fitch acknowledged that while Nigeria’s external debt service remains at a moderate level, broader fiscal challenges persist. These include elevated interest payments, underperforming revenues, and constrained fiscal space, all of which place pressure on public finances.
“Interest payments are projected to account for a large portion of government income,” the report stated, adding that Nigeria’s general government interest-to-revenue ratio could exceed 30%, with the federal government’s ratio nearing 50%. The country’s revenue-to-GDP ratio, although expected to improve, will likely remain structurally low, averaging 13.3% over 2025 and 2026.
Debt and Reserve Dynamics
Fitch projects general government debt to hover around 51% of GDP during the same period. Meanwhile, Nigeria’s foreign reserves, which peaked at $41 billion in late 2024, have since declined to $38 billion, partly due to debt repayments. Still, reserves are expected to cover around five months of external payments, which is relatively strong compared to similarly rated countries.
Despite a recent delay in a Eurobond coupon payment in March, Fitch noted that Nigeria has made strides in improving policy transparency and fiscal credibility.
Policy Reforms Showing Results
The report highlighted several key reforms—such as the removal of fuel subsidies, exchange rate liberalization, and monetary tightening—as instrumental in stabilizing the economy. These measures have contributed to stronger foreign exchange inflows, with net official FX inflows rising by 89% in Q4 2024, according to Fitch.
Inflation is projected to average 22% in 2025, but formalization of FX markets is expected to support currency stability, albeit with a modest depreciation in the short term.
Fitch warned, however, that Nigeria’s fiscal and external positions remain vulnerable to external shocks, especially fluctuations in global oil prices and delays in policy execution.
Fiscal Pressures Mounting
Nigeria’s external and domestic debt servicing costs have surged. Data from the Central Bank of Nigeria shows the country spent $5.47 billion on external debt payments between January 2024 and February 2025. On the domestic front, total debt servicing hit N13.12 trillion in 2024—well above the budgeted N12.3 trillion, and a significant jump from N7.8 trillion in 2023.
The 2025 federal budget has already allocated N16 trillion to cover debt obligations, reflecting the government’s expectation of continued borrowing costs.
While Fitch maintains a stable outlook, it emphasized that sustained fiscal discipline and effective implementation of reforms will be critical to Nigeria’s medium-term financial stability.
