Nigeria’s Debt to Drop Around 36% of GDP in 2025 –Moody’s

Nigeria’s Debt to Drop Around 36% of GDP in 2025 –Moody’s

Nigeria’s debt is projected to hover around 36% of the nation’s gross domestic product (GDP) in 2025, Moody’s Ratings said at the end of completing a review.

The National Bureau of Statistics reported this week that the country’s total public debt has surpassed N152 trillion as of the second quarter of 2025. Debt to GDP remains below the Debt Office target and fiscal responsibility benchmark, according to analysts.

But the spate of borrowing has continue to increase despite rising revenue from crude oil receipt, supported by increase production volume in 2025. The market had expected increase revenue to the government, supported by savings from oil subsidy removal would slowdown borrowings.

According to Moody’s, Nigeria’s ratings reflect fiscal pressures arising from very limited revenue-generation capacity, despite measures to improve tax collections, and weak debt affordability, notwithstanding a moderate debt burden.

The ratings agency stated that the very weak institutional and governance framework further constrains the country’s credit strength.

“These challenges are balanced by the country’s large and diversified economy, underpinned by strong domestic demand potential, and more robust external buffers built over the past two years following the overhaul of foreign-exchange management”, Moody’s in a commentary note.

It emphasised that the Nigerian economy remains strong in 2025, with GDP growth near 4% in the first half of the year, broadly in line with 4.1% in 2024, despite subdued oil production.

“Output has increased to an average of 1.66 million barrels per day, up from 1.52 in the same period of last year, but still well below the 2.1 million medium-term target.

“Inflation eased to 16.1% in October, down from near 25% in January. In late September, the Central Bank of Nigeria cut its policy rate by 50 basis points to 27%, signalling the start of a gradual easing cycle.

“The naira has remained broadly stable following the 2023 foreign exchange reforms, and has appreciated by about 7% year-to-date through October, while the current account remains with a solid surplus”, Moody explained.

Supported by a trade surplus, resilient oil earnings, strong capital inflows, and steady remittances, gross foreign exchange reserves have increased to $43.2 billion as of October, up by $2.3 billion year-to-date.

As of November, MarketForces Africa reported that Nigeria’s gross external reserves printed above $44 billion, thought the Central Bank told a forum the nation’s foreign reserve has reached $46.70 billion, highest level since 2019.

“We expect external buffers to remain solid through 2025, with the current account surplus only slightly below last year’s level, around 6%, before narrowing in 2026 to 3.8% under our assumption of oil prices averaging $60 per barrel”.

The federal government has also returned to the eurobond market in November, issuing $2.35 billion, but near-term financing still relies heavily on costly domestic borrowing.

“We project debt will decline to around 36% of GDP in 2025, with the fiscal deficit widening to 2.7% this year”. Newly approved tax reforms, going into effect in 2026, should gradually strengthen revenue mobilization over the medium term.

Nigeria’s economic strength is scored at “ba2”, reflecting its sizeable and somewhat diversified economy, set against low economic growth relative to population growth and low income levels that constrain loss-absorption capacity.

The oil sector contributes modestly to GDP, but its role in foreign-exchange generation remains significant; current subdued oil production therefore continues to weigh on the economy. We assess Nigeria’s institutions and governance at “caa2”.

Persistent challenges in policy formulation and implementation, coupled with weak law enforcement – highlighted by low tax compliance – underscore governance weaknesses.

The country ranks near the bottom of various international governance indicators. Analysts assess Nigeria’s fiscal strength at “b3”, reflecting a moderate government debt burden that remains vulnerable to naira depreciation, alongside very low revenue generation and high interest payments, which exert considerable pressure on the budget.

Moody’s said Nigeria’s susceptibility to event risk is scored at “ba”, driven equally by political risk, government liquidity risk, banking sector risk and external vulnerability risk.

“The stable outlook reflects our view that external and fiscal improvements will slow but not reverse entirely. We expect broad policy continuity, with the Central Bank of Nigeria maintaining its current foreign-exchange regime amid a positive balance of payments, albeit weaker due to lower oil prices”.

Efforts to enhance non-oil revenue will continue, Moody’s said, though fiscal outcomes and reform initiatives will be shaped by the electoral context. It noted that inflation will continue to decelerate, enabling additional monetary policy easing.

Moody’s said upward pressure on the rating would stem from sustained improvements in revenue generation capacity and access to lower-cost financing, resulting in stronger debt affordability, while preserving macroeconomic stability.

Measures that enhance the quality of Nigeria’s institutional framework and governance would also strengthen its credit profile, the ratings agency added.

“Such developments would likely occur alongside continued structural reforms and macroeconomic stability, including a flexible foreign exchange regime without significant currency depreciation and robust reserve levels, signalling a more effective policy framework.

“Downward pressure on the rating could arise if debt metrics and affordability weaken significantly, for example due to policy reversals driven by political changes or social demands, or external shocks such as a sharp decline in oil prices.

“A resurgence of inflationary pressures, if not effectively managed by monetary authorities and resulting in tighter financing conditions, would also weigh on the credit profile.” In addition, a deterioration in the security environment that causes significant economic disruption would be negative for the rating, Moody’s stated in review. Ikeja Hotel Hits Highest Valuation in 52-Week, Gains 45%