Fitch Ratings Projects Nigeria’s External Debt Service to Exceed…

Fitch Ratings projects that Nigeria’s external debt service will increase to $5.2 billion in 2025, significantly rising from $1.07 billion in December 2024. Key factors include $4.5 billion for loan repayments and a $1.1 billion Eurobond due in November. Despite fiscal challenges, Nigeria’s rating was upgraded from negative to stable.

Fitch Ratings has announced a projection indicating that Nigeria’s external debt service is anticipated to escalate to $5.2 billion in 2025. This figure represents a significant increase from the $1.07 billion recorded as of December 2024, as reported by the Debt Management Office (DMO). The agency’s analysis highlights that the external debt service bill is expected to rise further in the coming years.

The credit rating agency specified that this service bill is set to increase due to various obligations, with $4.5 billion earmarked for loan repayments, which includes a substantial $1.1 billion Eurobond repayment due in November 2025. The projected debt service in 2025 represents almost five times the amount paid in 2024 and exemplifies the growing burden of foreign loans on Nigeria.

Fitch observed that Nigeria encountered delays in making a payment in March, indicating potential issues in financial management. The government’s total debt is expected to maintain at approximately 51% of the nation’s economy for the next two years, meaning that for every $100 generated, $51 is owed. The country faces challenges in revenue collection, where nearly 30% of collected funds are directed towards servicing debt interest, straining fiscal capacity.

Paradoxically, while the situation appears severe, Fitch upgraded Nigeria’s rating from negative to stable—a minor yet significant positive adjustment amid ongoing economic pressures. The report urges collaboration between the government and private sectors to improve workforce skills, suggesting a proactive approach to alleviate some financial burdens in the future.

In summary, Fitch Ratings forecasts that Nigeria’s external debt service will rise significantly to $5.2 billion by 2025, underlining the increasing fiscal pressures faced by the government. The ongoing challenges in effective revenue collection and a notable delay in payments highlight underlying financial instability. However, the recent upgrade to a stable rating may provide a glimmer of hope for the nation as it navigates these economic difficulties.

Original Source: businessday.ng