Elsie UdohNigeria’s external debt service payments saw a significant drop in February 2025, declining from $540 million in January to $276 million.
That’s nearly a 50% reduction in just one month. But why did this happen, and what factors contributed to this unexpected relief in Nigeria’s debt payments?
Join our WhatsApp ChannelIf you’ve been following Nigeria’s economic situation, you’ll know that the country has been battling high debt levels for years.
However, in 2025, several key strategies and favourable economic conditions combined to ease the pressure.
Here are four major reasons why Nigeria’s external debt payments dropped in 2025.
1. Debt Restructuring and Negotiations
One of the biggest reasons behind the drop in Nigeria’s external debt service payments is the government’s efforts to restructure its debt.
Over the past year, Nigeria has actively negotiated better repayment terms with creditors, securing lower interest rates and extended repayment periods.
By restructuring some of its debts, Nigeria managed to push back certain obligations, easing the immediate financial burden.
Think of it like negotiating with a landlord to spread out your rent payments so you don’t have to pay everything at once.
This approach has given the country more breathing room to manage its finances effectively.
2. Improved Economic Conditions and Credit Ratings
Nigeria’s economy has shown signs of improvement, and this has played a role in reducing debt service payments.
Global credit rating agencies have taken note of Nigeria’s economic reforms, leading to improved ratings.
A better credit rating means that when Nigeria borrows money, it does so at lower interest rates, reducing the cost of servicing debt.
At the same time, Africa as a whole is experiencing a reduction in debt service payments, with payments across the continent expected to drop by 13% in 2025.
This is partly due to better economic management and successful debt restructuring initiatives by various governments, including Nigeria.
READ ALSO: Six Alarming Facts About Nigeria’s Growing Debt Crisis
3. Higher Oil Production and Increased Revenue
Nigeria’s oil sector has also played a crucial role in easing the country’s debt burden.
Over the past year, the government ramped up efforts to increase oil production and reduce oil theft, particularly in the Niger Delta region.
Thanks to these efforts, daily oil production increased from around 1.4 million barrels per day (bpd) to 1.8 million bpd, with a target of reaching 3 million bpd by the end of 2025.
This boost in oil production has resulted in higher revenue for the country, giving the government more financial resources to meet its obligations without borrowing excessively.
To put it simply, more oil production means more money in Nigeria’s pocket, making it easier to manage debt payments.
4. Strategic Economic Reforms
The Nigerian government has implemented bold economic reforms that have helped stabilise the country’s finances.
Key measures include:
- Exchange Rate Unification: The government has worked to unify exchange rates, reducing the inefficiencies and arbitrage opportunities that previously drained public funds.
- Fuel Subsidy Removal: Although controversial, the removal of fuel subsidies has freed up a significant portion of government revenue, allowing for better fiscal management.
- Improved Revenue Collection: Efforts to boost tax collection and minimise revenue leakages have also contributed to the country’s ability to service its debt more effectively.
These reforms have not been without their challenges, but they have played a key role in reducing Nigeria’s reliance on external borrowing, ultimately leading to lower debt service payments.
Conclusion
Nigeria’s significant drop in external debt payments in 2025 is the result of strategic financial decisions and favourable economic conditions.
Debt restructuring, improved credit ratings, increased oil revenue, and bold economic reforms have all combined to ease the country’s debt burden.
While challenges remain, this reduction in debt service payments is a step in the right direction for Nigeria’s financial stability.
If the country continues on this path, it could set a foundation for sustainable economic growth and reduce dependency on external borrowing in the future.
Elsie Udoh is an SEO content writer who specialises in writing engaging stories that resonates with diverse audiences. She studied mass communication at the Lagos State University.
