The World Bank has warned that Nigeria and other Sub-Saharan African countries must pursue export diversification and fiscal reforms to effectively address their growing debt challenges.
The warning was contained in the newly released International Debt Report 2025 published by the global financial institution.
The report identifies Sub-Saharan Africa as an outlier among global regions, noting that debt levels and servicing costs continued to rise through 2024 despite subdued gross domestic product growth.
It explained that the region’s rising debt profile was driven largely by countercyclical official financing rather than productive investment, with Nigeria and other countries experiencing growing external debt burdens amid sluggish economic expansion.
Nigeria’s total public debt stock, comprising both external and domestic components, rose by 2.01 per cent quarter-on-quarter to N152.39tn, equivalent to US$99.65bn, in the second quarter of 2025.
This increase followed a debt position of N149.38tn, or US$97.23bn, recorded in the first quarter of 2025.
Financial analysts have expressed concern over Nigeria’s debt trajectory, citing continued government borrowing to finance persistent budget deficits.
According to the 2026 budget framework obtained from the Budget Office of the Federation, the Federal Government plans to borrow N17.89tn in 2026.
This follows recent approvals secured in late 2025 for N1.15tn in domestic loans to support the implementation of the 2025 budget.
The World Bank noted that Sub-Saharan Africa diverged from other regions in the post-COVID period, with external debt stocks growing year-on-year even as economic output lagged behind.
The analysis, covering regional trends from 2015 to 2024, shows that the disconnect between growth and borrowing was particularly pronounced across the region.
“Sub-Saharan Africa stands out as an exception, both debt levels… and servicing burdens have continued to rise even as growth remains subdued, underscoring persistent fiscal stress,” the report states.
It added that negative correlations between GDP growth and debt accumulation intensified in Sub-Saharan Africa during the 2020–2024 period, with 64 per cent of low- and middle-income countries exhibiting this pattern across the continent.
The report further observed that elevated debt levels have increased the region’s vulnerability by crowding out spending on health, education and infrastructure.
It also linked high debt exposure to nutrition insecurity and institutional weaknesses across affected countries.
“High external debt burdens are also associated with broader systemic fragility, because countries with weaker institutions… face elevated vulnerability,” the analysis warned.
The World Bank noted that growth in low- and middle-income countries is projected to dip to 4.3 per cent in 2025 amid rising trade tensions.
Meanwhile, Nigeria raised $2.2bn through Eurobond issuances in 2024 at yields of 9.625 per cent and 10.375 per cent to help finance its budget deficit.
The issuance marked Nigeria’s return to the international debt market after a one-year hiatus.
According to the World Bank, Eurobond issuances by International Development Association-eligible countries, such as Nigeria and Kenya’s $1.5bn Eurobond with a 9.75 per cent coupon, signal renewed investor confidence.
However, the report noted that these borrowings were secured at elevated interest rates not seen since before the 2008 global financial crisis.
It added that private creditor commitments to low- and middle-income countries averaged 5.89 per cent in 2024.
“Nigeria successfully raised US$2.2bn in Eurobonds to help fund its budget deficit,” the report notes.
It stated that Sub-Saharan Africa bond flows surged by 55.6 per cent to $27.7bn, even as principal repayments are expected to rise sharply.
The report warned that principal repayments in low-income countries are projected to increase by 87.5 per cent by 2026.
The World Bank also reported that Nigeria recorded one of Africa’s largest current account surpluses in 2024, alongside Djibouti and Angola.
This performance stood in contrast to deficits recorded by many low- and middle-income countries globally.
Despite this, the report grouped Nigeria with high-risk peers such as Kenya, Mozambique and Zambia.
“As of 2024, 23 LMICs had current account surpluses—the largest were in Africa (Djibouti, Nigeria, and Angola), followed by several countries in Europe and Central Asia (Azerbaijan and Tajikistan),” the report emphasised.
The World Bank stated that Nigeria ranked among the top borrowers eligible for International Development Association support.
It noted that Nigeria received significant World Bank inflows alongside countries such as Bangladesh, Kenya and Pakistan.
The report revealed that Nigeria was among the major beneficiaries of record credit extended by multilateral creditors in 2024.
Multilateral lending reached US$36bn during the year, representing a 30.4 per cent increase.
“Multilateral creditors continued to provide the most support to LMICs, albeit at a much slower pace following the unprecedented support provided during the COVID-19 pandemic, recording US$70.1bn in net debt inflows in 2024,” the report stated.
It added that net debt flows from multilateral creditors declined by 5.1 per cent in 2024 but still accounted for 48.5 per cent of net long-term debt inflows to low- and middle-income countries.
“Despite the overall decrease, net flows from the World Bank (International Bank for Reconstruction and Development and International Development Association lending) reached an all-time high of $36bn, increasing 30.4 per cent in 2024,” the report noted.
It said these flows represented 51.3 per cent of net lending from multilateral institutions.
The report added that Bangladesh, Kenya, Nigeria, the Philippines and Ukraine were the largest recipients of World Bank funding during the period.
It further stated that the European Union provided the second-largest volume of net debt flows in 2024, amounting to US$15.5bn, largely driven by financial support extended to Ukraine.
