Nigeria’s External Debt Service Eases While Eurobond Preparation Advances: Refinancing Risk Remains Concentrated In Market Funding

Nigeria’s external debt-service payments declined 31% year on year to approximately US$954.1 million in Q1 2026, according to figures attributed to the Debt Management Office. The improvement was driven mainly by lower non-market-related payments, while market-related payments increased to about US$501.8 million. Separately, the DMO requested expressions of interest from transaction advisers for a proposed 2026 Eurobond, but the process does not commit the government to an issuance.

The credit-positive signal from lower aggregate payments is therefore tempered by the composition of the decline and by continued reliance on commercial funding. Higher market-related payments leave Nigeria exposed to elevated external borrowing costs, while any eventual Eurobond would add a refinancing and execution test for the sovereign. Reports that a new transaction could require higher yields than the November 2025 Eurobond point to a pricing premium tied to market and geopolitical risk, rather than a confirmed deterioration in debt service capacity.

For Nigerian Eurobonds, the most sensitive segment would be new-issue pricing and longer-dated external debt, where the refinancing premium compounds duration exposure. The adviser-selection process may improve issuance preparedness, but the absence of a firm mandate or launch means the market cannot yet treat the transaction as a committed source of external liquidity.

The next conditional marker is whether preparatory work becomes a funded issuance and at what cost. A transaction that clears only through materially higher pricing would preserve market access while increasing future external debt-service burdens; continued preparation without issuance would leave Nigeria’s refinancing profile reliant on existing funding channels.