Fitch Ratings, the American credit rating agency, has projected that Nigeria may spend about $5.2 billion on debt service this year.

The agency stated this in its new rating commentary on Nigeria, where it upgraded Nigeria's long-term foreign currency issuer default rating to B from B-, with a stable outlook.

Fitch projects new external debt service

It said the government’s external debt will rise from $4.7 billion in 2024 to $5.2 billion this year.

Fitch stated that the government's external debt service is moderate but will rise to $5.2 billion in 2025 from $4.7 billion in 2024, and fall to $3.5 billion in 2026.

The credit rating firm also disclosed a delay in the Eurobond coupon payment due on March 28, 2025, which shows persistent challenges in public finance management.

Fitch warned that high interest costs, weak revenue, and limited financial space are significant concerns.

It stated that general government debt was expected to be at about 51% of DP in 2025 and 2026. It, however, expressed concern over the government’s revenue position, saying that interest payment may consume a large portion of income.

Fitch commends Nigeria’s reserves position

According to reports, Fitch expects revenue-to-GDP to rise but may remain low, accounting for a high general government interest/revenue ratio, above 30%, with a federal government/revenue ratio of about 50%.

The rating agency disclosed that Nigeria’s gross reserves increased to $41 billion at the end of 2024, before declining to $38 billion due to debt service payments.

The company added that recent policy reforms have caused an increase in foreign exchange inflows and monetary stability, with inflation predicted to be at 22% in 2025.

“Net official FX inflows through the CBN and autonomous sources rose by about 89 per cent in Q4 2024. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term,” Fitch said.

Fitch commended the Nigerian government’s commitment to economic reforms including subsidy removal, liberalising exchange rates and monetary policy tightening.

The ratings company noted that the policies improved credibility and boosted Nigeria’s ability to absorb shocks.

FG services debt with $.47 billion

It, however, warned that risks to Nigeria’s external and fiscal position remain, especially if oil prices drop or policy implementation slows.

Legit.ng earlier reported that Nigeria serviced external debt with about $5.47 billion between January 2025 and February 2025.

Additionally, Nigeria spent about N13.12 trillion on debt servicing in 2024, a whopping 68% increase from N7.8 trillion recorded in the previous years.

Data from the Debt Management Office (DMO) shows that debt servicing costs in 2024 exceeded the budgeted N12.3 trillion for 2024.