Fitch Ratings predicts Nigeria’s external debt service will reach $5.2 billion in 2025, up from $1.07 billion in December 2024. This increase is primarily due to $4.5 billion in loan repayments and substantial interest costs. Nigeria’s total debt will equate to 51% of its economy, with inadequate tax revenue exacerbating the situation. Despite these challenges, Fitch has upgraded Nigeria’s outlook from negative to stable.
Fitch Ratings has forecasted that Nigeria’s external debt service will escalate to $5.2 billion in 2025. This figure reflects a significant increase from the $1.07 billion reported by the Debt Management Office (DMO) as of December 2024. The rating agency outlines that the debt service obligation will involve $4.5 billion in amortizations, which includes a notable repayment of $1.1 billion for a Eurobond due in November 2025.
In 2025, Nigeria’s debt service requirements will nearly quintuple compared with the previous year, necessitating the payment of $5.2 billion for foreign loans. A substantial portion of this amount, totaling $4.5 billion, will be allocated towards repaying the principal loan amounts as opposed to interest alone.
Fitch noted a delay in Nigeria’s debt payment in March, indicating potential financial management issues. Furthermore, the country’s total government debt ratio is projected to stabilize around 51% of the national economy over the next two years, meaning the government owes approximately $51 for every $100 produced by the economy.
The government’s fiscal challenges are compounded by inadequate tax collection, with approximately 30% of revenue being directed towards interest payments on existing debt. Alarmingly, almost half of the federal government’s revenue is consumed by these interest payments.
Yet, despite the challenges, Fitch has adjusted Nigeria’s credit outlook from negative to stable, suggesting a small positive shift in the country’s financial narrative.
In summary, Fitch Ratings has projected a sharp increase in Nigeria’s external debt service to $5.2 billion in 2025, primarily due to significant loan repayments. The rising debt obligations highlight ongoing fiscal management challenges, particularly in tax revenue collection. Nevertheless, the slight improvement in credit outlook serves as a small optimistic development amidst these financial strains.
Original Source: businessday.ng
