$145 Billion Foreign Debt: World Bank Data Exposes Nigeria’s Costly Borrowing Challenge

By FIDELUS ZWANSON

Debt stock climbs despite improvements in selected indicators

NIGERIA’S external debt reached $145.02bn in 2025, even as some indicators measuring the country’s debt relative to exports and national income recorded improvements.

The World Bank Group’s latest International Debt Statistics showed that Nigeria’s external debt increased by 6.6 per cent during the year, continuing a decade-long upward trend from $83.21bn in 2015.

Over the 10-year period, the country accumulated approximately $61.8bn in additional external debt.

Nevertheless, the report revealed a more complicated picture of Nigeria’s debt sustainability. Although external debt declined relative to exports and gross national income, the cost of servicing those obligations increased in relation to the same economic indicators.

Debt servicing places pressure on foreign exchange earnings

According to the World Bank, Nigeria’s debt service-to-export ratio stood at 19 per cent, representing a 9.6 per cent increase.

Similarly, debt service as a proportion of gross national income rose by 6.9 per cent to five per cent.

These developments contrasted with improvements in the country’s external debt ratios. External debt relative to exports declined by 4.3 per cent to 212 per cent, while external debt as a proportion of gross national income fell by 6.6 per cent to 51 per cent.

The distinction between these measurements is important. While debt-stock ratios indicate the scale of outstanding obligations relative to a country’s economic output or export earnings, debt-service ratios reflect the pressure of meeting scheduled payments.

Consequently, improvements in the former do not necessarily mean that a country has reduced the immediate financial burden of servicing its loans.

Expensive private borrowing raises financing concerns

Another important finding concerns the cost of Nigeria’s access to international credit.

The World Bank reported that new loans from private creditors carried an average interest rate of 9.6 per cent in 2025, compared with 1.9 per cent for official lending.

This meant that private creditors charged approximately five times the interest rate offered by official lenders.

The difference extended beyond interest rates. Official loans had an average maturity of 25 years and a five-year grace period, while private loans carried an average maturity of 12 years and an eight-year grace period.

Although private creditors offered a longer grace period, the shorter average maturity and substantially higher interest rate increased the financing costs associated with their loans.

However, the precise financial impact depends on the principal borrowed, currency denomination, repayment schedule and other contractual conditions.

Debt composition reveals multiple sources of exposure

Nigeria’s $145.02bn external debt stock comprised $62.40bn in public and publicly guaranteed obligations, $54.48bn in private nonguaranteed debt and $28.14bn in short-term debt.

Within public and publicly guaranteed obligations, multilateral creditors accounted for $31.37bn, bilateral lenders held $6.68bn and private creditors accounted for $24.35bn.

The International Development Association, the World Bank’s concessional lending arm, was the country’s largest multilateral creditor, with $18.53bn.

Meanwhile, IMF special drawing rights allocations accounted for $5.52bn, while other multilateral institutions held $7.32bn.

China ranked as Nigeria’s largest bilateral creditor, with $5.67bn, followed by France with $774m and other bilateral lenders with $237m.

This composition highlights the importance of understanding the different financing arrangements behind Nigeria’s external debt rather than treating the entire portfolio as a single borrowing category.

Economic indicators provide broader context

The World Bank placed Nigeria’s gross national income at $281.70bn and its population at 237.5 million in 2025.

These figures provide important context for assessing the country’s external obligations and its capacity to meet repayment commitments.

Nevertheless, the increase in debt-service ratios suggests that the pressure of meeting external financial obligations remains an important consideration, even when selected debt-stock indicators improve.

For an economy that relies on foreign exchange earnings to meet international obligations, the relationship between export receipts, debt repayments and access to affordable financing remains particularly significant.

World Bank calls for stronger debt transparency

Beyond borrowing costs and repayment indicators, the World Bank has emphasised the need for accurate debt information to support responsible financial decisions.

The institution’s Chief Statistician, Haishan Fu, said the World Bank Group had worked with borrowing countries for more than five decades to establish a comprehensive source of comparable external debt statistics for developing economies.

However, she stressed that transparency could not depend solely on information submitted by debtor countries.

Fu explained that the World Bank had strengthened its verification process by reconciling loan-by-loan records submitted through its Debtor Reporting System with corresponding information supplied by bilateral creditors.

She added that the creditor data-sharing exercise, launched in 2022, had helped reconcile records, identify discrepancies, validate information and close critical data gaps.

According to her, effective debt transparency involves comparing information from borrowers and creditors, resolving inconsistencies and gradually improving the reliability of the common database used for debt decisions.

Nigeria’s latest debt statistics therefore highlight several interconnected challenges: the rising stock of external obligations, the high cost of private international borrowing and the increasing pressure of debt servicing relative to export earnings and national income.

Ultimately, the figures reinforce the importance of examining the terms of new loans, the composition of existing obligations and the country’s capacity to meet repayment commitments when assessing the sustainability of external borrowing.