Fitch Forecasts Nigeria’s External Debt Service Increase to $5.2 Billion by 2025

Fitch Ratings projects Nigeria’s external debt service to reach $5.2 billion in 2025, increasing from $1.07 billion in December 2024. This substantial rise indicates heightened repayment obligations, with specific concerns regarding Nigeria’s financial management and limited tax revenues. In spite of these challenges, Fitch upgraded Nigeria’s rating from negative to stable, presenting a cautiously optimistic outlook.

Fitch Ratings has forecasted that Nigeria’s external debt service will escalate to $5.2 billion in 2025, a notable increase from $1.07 billion reported in December 2024. This projection indicates a rise from $4.7 billion in 2024, with anticipated repayments including $4.5 billion in loan amortizations and a significant Eurobond repayment of $1.1 billion due in November 2025.

The growing debt obligation signifies that Nigeria will need to allocate $5.2 billion towards its foreign loans in 2025, which represents an almost fivefold increase compared to the previous year. A majority of this amount, specifically $4.5 billion, will address the principal loans rather than merely servicing interest. Additionally, a delay in a payment noticed by Fitch in March raises concerns regarding Nigeria’s financial management.

Notably, the government’s total debt is expected to remain approximately 51% of Nigeria’s economy over the next two years, illustrating that for every $100 generated, the government owes about $51. Unfortunately, tax revenues are insufficient, with about 30% of collected funds directed towards servicing debt interest, and almost half of federal government revenues consumed by interest payments alone.

Despite these fiscal hurdles, Fitch has improved Nigeria’s credit rating from negative to stable, representing a minor positive adjustment amidst ongoing financial challenges. The government is pursuing collaboration with the private sector and civil society organizations to enhance workforce skills, which may contribute to economic improvement.

In summary, Nigeria’s external debt service is anticipated to significantly rise to $5.2 billion in 2025, driven primarily by loan repayments. Despite a concerning fiscal landscape highlighted by high interest obligations and insufficient tax revenues, a favorable adjustment in the country’s credit rating reflects some optimism. Active efforts towards workforce enhancement may create pathways for better economic management moving forward.

Original Source: businessday.ng