Exchange Rate Dynamics, Fiscal Deficit To Shape Nigeria’s Total Debt – PwC

PwC has said Nigeria’s total debt in 2025 will be shaped by its exchange rate dynamics and planned fiscal deficit.

The company stated this in its report on Nigeria’s 2025 Budget and Economic Outlook.

The report said “the year 2025 brings positive prospects of economic recovery for Nigeria. Many expect tapered inflation, a stable exchange rate, and moderate economic growth, subject to sustained reforms and disciplined policy execution.”

The report noted that “external debt rose by 89.7 per cent to N63.1 trillion in dollar terms and by 31.6 per cent to N71.2 trillion in Q2, 2024, up from N54.31 trillion in Q2 2023, due to increased FGN bond subscriptions and a 47 per cent naira depreciation from N770.38/$ to N1,470.19/$.”

It explained that “in 2025, exchange rate dynamics will influence total debt, with further naira devaluation increasing external debt burdens. The oversubscription of Nigeria’s $2.2 billion Eurobond, with a peak order book of over $9 billion, highlights investor confidence but adds to the debt load. Reliance on debt instruments without matching revenue-generating investments risks crowding out private sector investment and worsening debt sustainability in the long term.”

On key issues for consideration in 2025, PwC noted that foreign exchange stability, price stability and interest rate are essential monetary issues of focus in 2025.

It emphasised that the exchange rate is expected to stabilise in 2025 supported by CBN foreign exchange reforms, which are expected to drive FX inflows, adding that “persistent imbalances between money supply growth and productivity in 2025 may further undermine the Central Bank of Nigeria’s ability to manage inflation effectively.

To ensure long-term price stability and economic stability, disciplined monetary policy is essential to address naira liquidity challenges and curb inflationary pressures.”

The report also disclosed that moderate increase in remittance inflows, moderate capital inflows, and negative real returns are critical issues on attracting investment in 2025.

According to the report, Diaspora remittances through IMTOs is projected to continue into 2025, driven by improved economic conditions in advanced economies and supportive measures from the CBN.

“The outlook for 2025 is cautiously optimistic for Foreign Direct Investment (FDI), while Foreign portfolio investments (FPIs) are expected to continue growing, supported by favorable market conditions and ongoing economic reforms.”

It added that “Nigeria’s total direct remittances is projected to increase in 2025, driven by improved economic conditions in advanced economies as their monetary authorities continue to lower policy rates, supportive measures by the CBN to boost remittances and increased engagement with Nigerians abroad by the Nigerians in Diaspora Commission.”