Developing economies, including Nigeria, are grappling with an unprecedented debt burden as total external liabilities climbed to $8.9 trillion in 2024, according to the World Bank’s 2025 International Debt Report.
The report revealed that between 2022 and 2024, developing countries paid $741 billion more in principal and interest than they received in new external financing. The shortfall represents the largest financing gap recorded in at least five decades, placing intense pressure on public finances and raising red flags for international lenders and investors.
Although global interest rates peaked in 2024 and access to bond markets improved, the World Bank cautioned that the debt outlook remains highly fragile. Several countries were able to avoid outright defaults by restructuring approximately $90 billion in external obligations, the highest level of debt restructuring since 2010.
Private bondholders played a significant role during the period, providing $80 billion more in new financing than they received in repayments. This enabled a number of countries to return to international capital markets with multi-billion-dollar issuances. However, borrowing costs remained elevated, with interest rates averaging around 10 percent—roughly double pre-2020 levels.
World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, warned that improving global financial conditions should not breed complacency.
He noted that debt accumulation is continuing, often in more complex and risky forms, urging policymakers to use the current window of relative stability to strengthen fiscal frameworks rather than rush back into external borrowing.
Nigeria, classified as an International Development Association (IDA)-eligible country, remains one of the largest recipients of concessional financing from the World Bank. In 2024, IDA-eligible nations received $18.3 billion more in new financing than they repaid, alongside a record $7.5 billion in grants.
Such support has become increasingly vital as bilateral creditors, largely foreign governments, have scaled back lending. These creditors collected $8.8 billion more in repayments than they disbursed, following debt relief initiatives that in some cases reduced long-term obligations by up to 70 percent.
Domestically, Nigeria’s external debt stood at approximately $47 billion as of June 2025, up from $45.97 billion in the first quarter, according to figures from the Debt Management Office.
Beyond fiscal metrics, the report highlighted the social consequences of elevated debt levels. Developing countries paid a record $415 billion in interest alone in 2024—resources that could otherwise have been channelled into education, healthcare and infrastructure.
In countries where external debt exceeds 200 percent of export revenues, an average of 56 percent of the population is unable to afford the minimum daily diet required for long-term health. Among IDA-eligible countries, including Nigeria, nearly two-thirds of citizens face similar conditions.
The World Bank also pointed to a growing reliance on domestic borrowing. Of 86 countries with available data, more than half recorded faster growth in domestic government debt than external debt in 2024.
While the shift reflects progress in developing local capital markets, the bank warned that excessive domestic borrowing could crowd out private-sector credit and increase refinancing risks due to shorter maturities.
World Bank Group Chief Statistician and Director of the Development Data Group, Haishan Fu, noted that while expanding domestic debt markets represents a policy achievement, governments must strike a balance to avoid undermining private-sector growth.
