Fitch projects Nigeria’s external debt service to rise to $5.2 billion in 2025 from $4.7 billion in 2024, with significant repayments including $1.1 billion due for a Eurobond. Concerns about financial management persist, as tax revenues are insufficient, with a large portion allocated to interest payments. Despite challenges, Nigeria’s rating was upgraded from negative to stable.
Fitch Ratings has forecasted that Nigeria’s external debt service will escalate to $5.2 billion in 2025. The Debt Management Office (DMO) reported that Nigeria’s external debt service was $1.07 billion at the end of December 2024. In its report, Fitch highlighted that the external debt service bill is projected to rise from $4.7 billion in 2024, including $4.5 billion in amortizations and a $1.1 billion Eurobond repayment due in November 2025, before decreasing to $3.5 billion in 2026.
The increase in Nigeria’s debt burden is significant, as the expected service payment of $5.2 billion for 2025 represents nearly five times the amount paid in the previous year. Out of this amount, $4.5 billion will be allocated for loan repayments, rather than merely interest payments, emphasizing the gravity of the situation. The looming payment of $1.1 billion in November for an international bond is particularly noteworthy.
Fitch has also indicated that the Nigerian government was delayed in making a payment in March, raising concerns about the nation’s financial management. For the next two years, the country’s total government debt is anticipated to constitute roughly 51% of its GDP, implying that for every $100 generated by the economy, $51 is owed in debt.
When compared with peer nations, Nigeria’s government revenue collection remains inadequate, leading to approximately 30% of collected revenue being allocated to interest payments. Notably, nearly half of the federal government’s revenue is consumed by interest payments alone. Despite these financial challenges, Fitch has upgraded Nigeria’s rating from negative to stable, which suggests a minor improvement in outlook.
In summary, Nigeria’s external debt service is set to rise significantly in 2025, necessitating $5.2 billion to address foreign loans, a substantial increase from the previous year. The pronounced debt service burden highlights ongoing challenges in revenue collection and financial management. However, the upgrade of Nigeria’s rating from negative to stable reflects potential for improvement in its economic situation.
Original Source: businessday.ng
