NEWS
Nigeria’s External Debt Hits $145bn As World Bank Raises Alarm Over Rising Repayment Costs, Reveals $5bn Financing Deal
Nigeria’s external debt has climbed to a staggering $145.02 billion, representing a 6.6 per cent increase in 2025, as the World Bank raises concerns over the country’s growing debt-servicing burden and the risks associated with complex financing arrangements.
The latest figures have renewed attention on Nigeria’s rising financial obligations to foreign creditors, particularly as the country continues to grapple with the cost of servicing existing loans while seeking additional funding for economic development.
The figures were contained in the World Bank’s *International Debt Report 2026*, released on Thursday, November 5, 2026.
According to the report, Nigeria’s external debt increased from $83.21 billion in 2015 to $145.02 billion in 2025, representing an additional $61.8 billion in foreign debt obligations over a decade.
The report, which examined the external debt positions of low- and middle-income countries as of December 2025, put Nigeria’s total external debt at approximately $145.015 billion.
A breakdown of the figures showed that $62.4 billion represented public and publicly guaranteed debt, while $54.476 billion belonged to private borrowers whose loans were not guaranteed by the government. Another $28.139 billion consisted of short-term external debt obligations.
The figures indicate that government borrowing and government-backed loans account for less than half of Nigeria’s total external debt, with private-sector borrowing and short-term obligations making up the remainder.
The World Bank explained that public and publicly guaranteed debt includes loans obtained by the Federal Government, public institutions and state-owned enterprises, as well as private-sector loans backed by government guarantees.
Private nonguaranteed debt, on the other hand, covers long-term foreign loans obtained by private businesses without government backing.
External debt generally refers to financial obligations owed by individuals, businesses and institutions within a country to creditors outside its borders, irrespective of the currency in which the loans are denominated.
Beyond the increase in Nigeria’s external debt stock, the World Bank expressed concern over the growing pressure of repaying foreign loans, warning that debt-servicing obligations could increasingly constrain the country’s financial resources.
The report showed that Nigeria’s external debt-to-exports ratio stood at 212 per cent in 2025, while its external debt-to-gross national income (GNI) ratio was 51 per cent.
Meanwhile, the country’s debt-service-to-exports ratio stood at 19 per cent, while debt servicing as a percentage of GNI reached five per cent.
Although Nigeria recorded improvements in some debt indicators compared with 2024, the cost of servicing its foreign obligations moved in the opposite direction.
The external debt-to-exports ratio declined by 4.3 per cent, while the debt-to-GNI ratio dropped by 6.6 per cent. However, the debt-service-to-exports ratio increased by 9.6 per cent, while debt servicing relative to GNI rose by 6.9 per cent.
The development suggests that despite improvements in the relationship between Nigeria’s debt stock, national income and export earnings, the actual cost of meeting repayment obligations has continued to rise.
The report further revealed that debt servicing by low- and middle-income countries increased for the fifth consecutive year, reaching approximately $1.4 trillion in 2025.
Payments rose by 1.9 per cent during the year, largely driven by obligations to private creditors, particularly international bondholders.
Between 2022 and 2025, the countries covered by the report paid approximately $436.1 billion more in debt servicing than they received in fresh financing.
However, the trend shifted in 2025, when long-term debt flows recorded a net inflow of $45.4 billion, compared with a net outflow of $118.4 billion in 2024.
In the report’s foreword, World Bank Chief Statistician, Haishan Fu, described the situation as a worrying development, noting that although developing countries were gaining greater access to international financing, the cost of obtaining such loans was becoming increasingly expensive.
He warned that many developing economies were borrowing more while committing larger portions of their resources to debt repayments, leaving them with fewer funds for critical development priorities.
According to the report, increasing debt-service obligations are placing additional pressure on public finances and diverting resources that could otherwise support infrastructure development, employment generation, education and healthcare.
The World Bank consequently urged developing countries to prioritise affordable, transparent and sustainable financing arrangements rather than simply expanding their borrowing.
The World Bank report also highlighted Nigeria’s return to the international bond market in 2025, when the country raised $2.3 billion through a two-part sovereign bond issuance.
Nigeria was identified as the third-largest issuer among Sub-Saharan African countries eligible for financing under the International Development Association (IDA) during the period.
The $2.3 billion was raised through two separate bond instruments.
The first was a 10-year bond carrying an interest rate of 8.625 per cent, while the second was a 20-year bond with an interest rate of 9.125 per cent.
The World Bank noted that although developing countries regained access to international bond markets in 2025, borrowing costs remained considerably high, particularly for economies with weaker credit ratings.
Across IDA-eligible countries, the average interest rate on new loans obtained from private creditors increased to 8.2 per cent in 2025, the highest level since the late 1980s.
In comparison, the average interest rate on new loans from official creditors remained at 2.7 per cent between 2024 and 2025.
The gap between the two categories of lenders widened to 5.5 percentage points in 2025, compared with 3.4 percentage points in 2016.
For Nigeria specifically, the report put the average interest rate on new official external debt commitments at 1.9 per cent, while private creditors charged an average of 9.6 per cent.
It also showed that new official loans obtained by Nigeria had an average repayment period of 25 years, including a five-year grace period.
Loans from private creditors, however, had an average maturity of 12 years and an eight-year grace period.
The figures highlight the substantial difference between borrowing from official development institutions and raising funds from private investors and international financial markets, where interest rates are generally higher.
One of the most significant revelations in the report concerns Nigeria’s use of a financial arrangement known as a Total Return Swap (TRS), through which the country reportedly secured $5 billion in 2026.
The World Bank identified Nigeria alongside Angola, Argentina, Colombia and Senegal as countries that had entered into similar arrangements since 2024.
A Total Return Swap is a financial transaction that allows a government to access foreign currency by using government securities or other financial assets as collateral.
According to the report, Nigeria’s $5 billion transaction has a three-year maturity period and a collateralisation ratio of approximately 133 per cent.
This means that Nigeria provided securities valued at approximately $6.7 billion as collateral to secure the $5 billion financing arrangement.
The World Bank acknowledged that such transactions could provide governments with relatively quick access to foreign currency and, in certain circumstances, offer lower short-term financing costs than conventional borrowing.
However, it cautioned that the arrangements also expose participating countries to significant financial risks, including additional collateral demands, refinancing difficulties and transparency concerns.
The institution particularly raised questions about whether the full financial obligations associated with such transactions were being adequately reflected in countries’ official debt statistics.
It stressed that where a government receives funds upfront and is obligated to repay them, the arrangement should be recognised as debt, even when structured through financial derivatives.
The World Bank consequently called on governments to ensure comprehensive disclosure of such transactions, including the amounts borrowed, repayment timelines, collateral requirements, margin obligations and other contractual conditions.
It warned that inadequate disclosure could prevent citizens, investors and financial institutions from obtaining a clear picture of a country’s actual financial exposure.
The latest report places Nigeria’s rising external debt, expensive international borrowing and emerging financing arrangements under renewed scrutiny, particularly as the country seeks to balance its financing needs with the responsibility of maintaining sustainable public finances.