Fitch Ratings predicts Nigeria’s external debt service will reach $5.2 billion in 2025, a substantial increase from $1.07 billion in 2024. A significant portion of this payment will address principal loans, indicating rising fiscal pressures. Concerns arise from a missed payment in March, and tax revenue remains inadequate, with over 30% of funds directed towards interest. Despite challenges, Fitch has upgraded Nigeria’s rating from negative to stable.
Fitch Ratings has projected that Nigeria’s external debt service will rise to $5.2 billion in 2025. As reported by the Debt Management Office (DMO), Nigeria’s external debt service stood at $1.07 billion at the end of 2024. In its April 11 rating commentary, Fitch noted that this service bill is expected to increase significantly, moving from $4.7 billion in 2024 to this projected amount in 2025.
Notably, the rise in debt payments marks a significant escalation, as the country must allocate $5.2 billion towards servicing foreign loans in 2025, nearly five times the amount from the previous year. A substantial share of this total, approximately $4.5 billion, will be directed towards repaying principal loans, including a major payment of $1.1 billion for a Eurobond due in November 2025.
Fitch also highlighted a concerning trend, noting that Nigeria failed to make a payment in March, raising alarms regarding the country’s financial management. Furthermore, the government’s debt will remain around 51% of Nigeria’s economy in the upcoming two years, which indicates that for every $100 generated by the economy, the government owes about $51.
The government’s tax collection efforts appear insufficient compared to similar countries, exacerbating the debt situation. Presently, around 30% of government revenue is dedicated to interest payments on debt, while nearly half of federal government funds are spent on these interest obligations. Despite these financial challenges, Fitch has revised Nigeria’s credit rating from negative to stable, indicating a slight improvement in the country’s outlook.
In conclusion, Nigeria’s external debt service is anticipated to escalate significantly, with projections of $5.2 billion in 2025. This increase poses challenges to the nation’s economic management, especially in light of insufficient tax revenue. Furthermore, the government’s high dependency on interest payments exacerbates fiscal pressures. Nevertheless, the shift in Fitch’s rating from negative to stable offers a tempered outlook for Nigeria amidst these economic hurdles.
Original Source: businessday.ng
