Developing economies, including Nigeria, are grappling with an unprecedented debt crunch, as total external debt climbed to $8.9tn in 2024, according to the World Bank’s 2025 International Debt Report.

From 2022 to 2024, these countries paid $741bn more in debt servicing costs than they secured in fresh financing, the widest gap in at least half a century, highlighting severe strain on public finances and heightening risks for global lenders and investors.

While 2024 brought some easing as global interest rates peaked and bond markets partially reopened, the World Bank warned that debt vulnerabilities remain acute, in its report released in December.

Countries averted widespread defaults by restructuring $90bn in external debt, marking the largest annual restructuring since 2010. Private bondholders injected $80bn more in new funding than they received in repayments, allowing several nations to carry out multi-billion-dollar bond issuances. However, the relief came at a high price, with borrowing costs around 10 per cent—about twice pre-2020 levels.

World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said, “Global financial conditions might be improving, but developing countries should not deceive themselves; they are not out of danger.

“Their debt build-up is continuing, sometimes in new and pernicious ways. Policymakers everywhere should make the most of the breathing room that exists today to put their fiscal houses in order, instead of rushing back into external debt markets.”

Nigeria, designated as an IDA-eligible country, is one of the biggest borrowers from the World Bank’s concessional lending window. In 2024, the Bank disbursed $18.3bn more in new financing to IDA-eligible countries than it collected in repayments, in addition to a record $7.5bn in grants.

Such support remains vital, as bilateral creditors, primarily foreign governments—have largely pulled back, receiving $8.8bn more in repayments than they provided in new financing, after debt relief programmes that in some cases slashed long-term obligations by up to 70 per cent.

Meanwhile, Nigeria’s external debt stood at about $47bn as of June 2025, up from $45.97bn in the first quarter, according to the Debt Management Office, for a population of more than 200 million.

The report also underscored the social toll of elevated debt burdens, noting that developing countries paid a record $415bn in interest alone in 2024—resources that could otherwise have been channelled into education, healthcare and critical infrastructure.

In the most debt-burdened countries, where external liabilities exceed 200 per cent of export earnings, an average of 56 per cent of the population cannot afford the minimum daily diet required for long-term health. In IDA-eligible countries, including Nigeria, nearly two-thirds of people face the same constraint.
The report also highlights a rising dependence on domestic borrowing.

Among 86 countries with available data, more than half recorded faster growth in domestic government debt than in external debt in 2024.

While this trend signals advances in local capital market development, extensive domestic borrowing poses risks. It can divert banks toward holding government securities rather than lending to the private sector and, because such debt typically has shorter maturities, raise refinancing costs, the bank noted.