Nigeria faces significant challenges managing its debt, says Fitch

Fitch Ratings, says Nigeria faces significant challenges in managing its debt as pressure on interest-to-revenue ratios remains very high at 38 per cent, driven by higher interest rates and structurally low revenue-to-GDP ratios.

Gaimin Nonyane, Director, Middle-East and Africa sovereigns at Fitch Ratings, made this known during a post-sovereign rating webinar focused on Nigeria and Egypt.

Nigeria spent a sum of N7.8 trillion to service its debt obligations in 2023, a 121 per cent increase compared to N3.52 trillion incurred in the previous year, according to analysis of data released by the Debt Management Office (DMO).

The breakdown of the data shows that domestic debt service cost stood at N5.23 trillion, representing a 104 per cent increase from the previous year’s N2.56 trillion, while external debt service surged by 167 per cent to N2.57 trillion, compared to N962.5 billion recorded in 2022.

Data from the Debt Management Office indicates Nigeria has a total external debt portfolio of $42.29 billion up from $41.69 billion in 2022.

Starting at $464.1 million in 2017, these costs have steadily escalated. By 2018, the figure had more than tripled, peaking at $1.472 billion. After a slight decrease in 2019 to $1.334 billion, the costs climbed annually, culminating in 2023’s record high of $3.503 billion.

This substantial increase in debt servicing demands a large portion of Nigeria’s annual budget, restricting government spending in critical sectors such as health and education.

Nonyaneprojected a decline in Nigeria’s  debt costs, although they are expected to remain significantly high.