Developing countries, including Nigeria, are confronting their most severe debt squeeze in at least 50 years, with total external debt reaching a record $8.9tn in 2024, according to the World Bank’s 2025 International Debt Report.
Between 2022 and 2024, these economies paid $741bn more in principal and interest than they received in fresh financing, marking the largest net outflow in over five decades and intensifying pressure on public finances while heightening risks for global lenders and investors.
Although global interest rates peaked in 2024 and international bond markets partially reopened, the World Bank cautioned that debt vulnerabilities remain acute. The report described the relief as fragile and insufficient to reverse years of growing liabilities. In 2024, developing countries restructured roughly $90bn in external debt, the largest annual restructuring exercise since 2010, while private bondholders provided about $80bn more in new financing than they received in repayments, enabling several countries to return to international markets with multi-billion-dollar bond issuances. However, average interest rates remained near 10 per cent—about twice pre-2020 levels—significantly increasing future debt-servicing obligations.
World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, warned against complacency. “Global financial conditions might be improving, but developing countries should not deceive themselves; they are not out of danger,” he said. “Their debt build-up is continuing, sometimes in new and pernicious ways. Policymakers everywhere should use the breathing room that exists today to put their fiscal houses in order, instead of rushing back into external debt markets.”
Nigeria, classified as an International Development Association (IDA)-eligible country, remains among the largest beneficiaries of the World Bank’s concessional financing. In 2024, the Bank disbursed $18.3bn more in new financing than it received in repayments from IDA-eligible countries, alongside a record $7.5bn in grants. This support has become increasingly critical as bilateral creditors, mainly foreign governments, pulled back sharply, collecting $8.8bn more in repayments than they provided in new financing after debt-relief initiatives that, in some cases, reduced long-term debt stocks by up to 70 per cent.
For Nigeria, external debt pressures persist. The country’s external debt stood at approximately $47bn as of June 2025, up from $45.97bn in the first quarter, according to the Debt Management Office. With a population exceeding 200 million, debt servicing continues to constrain fiscal space amid rising social and infrastructure demands. The World Bank also highlighted the severe social consequences of high debt levels, noting that developing countries paid a record $415bn in interest in 2024 alone—funds that could have been directed to education, healthcare, and critical infrastructure. In the most heavily indebted economies, 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. Among IDA-eligible countries, including Nigeria, nearly two-thirds of citizens face the same challenge.
The report further observed a growing shift toward 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 reflects progress in developing local capital markets, the World Bank warned of risks, including crowding out private-sector lending and increased refinancing pressures due to shorter debt maturities.
World Bank Group Chief Statistician and Director of the Development Data Group, Haishan Fu, acknowledged the mixed implications of this trend. “The rising tendency of many developing countries to tap domestic sources for their financing needs reflects an important policy accomplishment,” she said. “It shows their local capital markets are evolving. But heavy domestic borrowing can spur banks to load up on government bonds when they should be lending to the private sector. Governments need to be careful not to overdo it.”
