Developing countries, including Nigeria, are grappling with a historic debt burden, with total external liabilities rising 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 nations paid $741 billion more in principal and interest than they received in new financing — the largest net outflow recorded in at least 50 years. The trend highlights growing pressure on public finances and raises concerns among global lenders and investors.
Although conditions eased slightly in 2024 as global interest rates peaked and international bond markets reopened, the World Bank warned that the outlook remains fragile. To avoid defaults, countries restructured about $90 billion in external debt during the year — the highest annual restructuring since 2010.
Private bondholders provided $80 billion more in new financing than they received in repayments, allowing several countries to return to global debt markets with multi-billion-dollar issuances. However, these inflows came at a high cost, with interest rates averaging around 10 per cent — roughly double pre-2020 levels.
World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, cautioned against complacency despite improving global financial conditions.
“Developing countries should not deceive themselves; they are not out of danger,” Gill said. “Debt accumulation is continuing, sometimes in new and pernicious ways. Policymakers should use the current breathing space to put their fiscal houses in order rather than rushing back into external debt markets.”
Nigeria, classified as an International Development Association (IDA)-eligible country, remains among the largest borrowers from the World Bank’s concessional financing arm. In 2024, the World Bank provided $18.3 billion more in new financing than it received in repayments from IDA-eligible countries, alongside a record $7.5 billion in grants.
This support has become increasingly critical as bilateral creditors — mainly foreign governments — have scaled back lending. In 2024, they collected $8.8 billion more in repayments than they disbursed in new financing, following debt relief initiatives that, in some cases, reduced long-term debt by up to 70 per cent.
According to Nigeria’s Debt Management Office, the country’s external debt stood at about $47 billion as of June 2025, up from $45.97 billion in the first quarter of the year.
The report also underscored the social consequences of rising debt. Developing countries spent a record $415 billion on interest payments alone in 2024 — resources that could otherwise have been invested in healthcare, education and critical infrastructure.
In the most heavily indebted nations, where external debt exceeds 200 per cent of export revenues, an average of 56 per cent of the population cannot afford the minimum daily diet required for long-term health. In IDA-eligible countries such as Nigeria, nearly two-thirds of residents face similar challenges.
The World Bank noted a growing shift toward domestic borrowing. Among 86 countries with available data, more than half recorded faster growth in domestic government debt than external debt in 2024. While this reflects progress in developing local capital markets, the bank warned of associated risks.
World Bank Group Chief Statistician and Director of the Development Data Group, Haishan Fu, said excessive domestic borrowing could crowd out private-sector lending and increase refinancing costs due to shorter debt maturities.
“Local capital markets are evolving, which is a positive development,” Fu said. “But governments must be careful not to overdo domestic borrowing, as it can divert banks from lending to the private sector and raise refinancing risks.”
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