The $2.86 bn debt service paid by Nigeria in the first eight months of 2025 has exposed a troubling reality: the country is bleeding foreign exchange reserves to service external debt, leaving little room for imports or development. Data from the Central Bank of Nigeria shows that of the $4.14 bn total foreign payments in that period, a staggering 69.1 percent went to debt service.

Though the absolute amount fell from $3.06 bn in the same period of 2024, the dominance of debt in Nigeria’s foreign outflows remains unshaken. In 2024, debt accounted for about 70.7 percent of foreign payments. Punch

Monthly Volatility & Its Implications

The breakdown of monthly payments in 2025 highlights sharp swings:

• January: $540.67 m (vs $560.52 m in Jan 2024)
• March: $632.36 m vs $276.17 m — a 129 % jump
• April: $557.79 m vs $215.20 m — 159 % higher
• May: $230.92 m vs $854.37 m — steep fall
• August: $302.30 m vs $279.95 m — slight rise

Nairamet

These fluctuations make planning difficult and increase macroeconomic risk. When “$2.86 bn debt service” dominates foreign payments, Nigeria loses flexibility to manage imports, infrastructure, or urgent social needs.

Structural Risks & Warnings

Debt experts and rating agencies have flagged the trend. Fitch predicts Nigeria’s total external debt service will hit $5.2 bn in 2025, with much of that going to amortizations and Eurobond payments.

Key risks include:

• Strained reserves: High outflow pressure on foreign exchange reserves
• Reduced capacity for imports: Less foreign exchange available for capital goods, essential supplies, and development projects
• Crowding out growth spending: With debt service dominating, less fiscal space remains for education, infrastructure, and health
• Revenue impotence: Nigeria’s revenue generation is structurally weak; when debt consumes most outflows, revenue shortfalls become fatal

What Must Be Done

To mitigate the danger of having $2.86 bn debt service consume most foreign payments, Nigeria must:

• Restructure external debt where possible
• Improve domestic revenue mobilization (tax reforms, broadening base)
• Incentivize growth sectors to earn more foreign exchange
• Tighten debt contracting standards and oversight
• Use FX reserves judiciously, prioritizing productive import categories