Developing countries, including Nigeria, are grappling with a historic surge in external debt, which reached $8.9 trillion in 2024, according to the World Bank’s 2025 International Debt Report.
The report highlights that between 2022 and 2024, these nations paid $741 billion more in debt repayments than they received in new financing the largest shortfall in at least five decades. This imbalance has intensified pressure on public finances and raised concerns for global investors.
Despite some relief in 2024, as interest rates peaked and bond markets reopened, the report warns that many countries remain financially vulnerable. Governments managed to avoid defaults by restructuring $90 billion in external debt, the largest annual restructuring since 2010.
Private bondholders also contributed $80 billion more in financing than they received in repayments, but at high costs, with interest rates around 10%, roughly double pre-2020 levels.
World Bank Group Chief Economist Indermit Gill cautioned, “Global financial conditions might be improving, but developing countries are not out of danger. Debt levels continue to rise, sometimes in new and risky ways. Policymakers must use the current breathing space wisely to strengthen their fiscal management.”
Nigeria, classified as an International Development Association (IDA) eligible country, remains a major recipient of concessional World Bank financing. In 2024, Nigeria and other IDA-eligible nations received $18.3 billion more in loans than they repaid, along with $7.5 billion in grants.
Meanwhile, bilateral lenders, including foreign governments, collected $8.8 billion more than they disbursed, following debt relief programs that in some cases reduced debt by up to 70%.
For Nigeria, external debt stood at approximately $47 billion as of June 2025, up from $45.97 billion in the first quarter of the year, according to the Debt Management Office.
The social impact of high debt levels is significant. Developing countries spent a record $415 billion on interest alone in 2024, funds that could have been used for education, healthcare, and essential infrastructure. In countries where debt exceeds 200% of export revenue, over half of the population cannot afford a minimum daily diet, with nearly two-thirds affected in IDA-eligible countries like Nigeria.
The report also notes a rising reliance on domestic borrowing. Of 86 countries analyzed, more than half saw domestic debt grow faster than external debt in 2024. While this reflects the development of local capital markets, heavy domestic borrowing can crowd out private-sector lending and increase refinancing costs due to shorter maturities.
Haishan Fu, Chief Statistician at the World Bank, emphasized that while domestic financing is an important policy achievement, governments should avoid overreliance, as it may strain local banks and elevate long-term costs.
