Nigeria's debt servicing is projected to spike in 2025, despite Fitch Ratings expressing confidence in the country's economy and policy measures. According to a report by Fitch, Nigeria's debt servicing is expected to increase, driven mainly by external debt servicing, which is projected to rise to $5.2 billion in 2025.

The report, titled "Fitch Upgrades Nigeria to 'B'; Outlook Stable", highlights Nigeria's commitment to policy measures implemented since its shift to conventional economic policies in June 2023. These measures include currency rate liberalization, monetary policy tightening, and moves to stop deficit monetization and eliminate fuel subsidies. Fitch believes these policies have improved policy coherence and credibility, reduced economic distortions, and enhanced resilience in the face of persistent domestic challenges and heightened external risks.

The report also notes that Nigeria's central bank has tightened monetary conditions by raising policy rates to 27.5% and using prudential and operational tools to strengthen monetary policy transmission. This has led to a projection of inflation averaging 22% in 2025 and 20% in 2026. Despite this, Fitch raised concerns about the country's external debt, noting that gross official reserves have dropped to $38 billion, covering about five months of current external payments.

Nigeria's current debt profile is a major concern, with the World Bank authorizing around 11 loan projects worth $7.45 billion in less than two years. The World Bank holds $17.32 billion of Nigeria's external debt as of the third quarter of 2024, making it Africa's largest debtor and the world's third-highest. Nigeria's national debt has reached N142 trillion by September 30, 2024, driven mostly by the naira's devaluation, which had a substantial impact on the country's foreign debt commitments.

The implications of Nigeria's rising debt servicing are significant, with potential risks to macroeconomic stability and external vulnerabilities. However, Fitch's confidence in Nigeria's economy and policy measures suggests that the country is on the right path towards recovery. As Nigeria navigates its complex recovery, it will be crucial to monitor the country's debt profile and policy measures to ensure sustainable economic growth.

In conclusion, Nigeria's debt servicing is expected to spike in 2025, driven mainly by external debt servicing. While this poses significant risks, Fitch's confidence in Nigeria's economy and policy measures suggests that the country is making progress towards recovery. As Nigeria continues to implement policy measures to improve its economy, it will be essential to monitor the country's debt profile and macroeconomic stability to ensure sustainable growth.