By FIDELUS ZWANSON

Nigeria’s $145bn External Debt Burden Raises Fresh Questions Over Repayment Capacity

NIGERIA’S external debt has reached $145.015 billion, bringing renewed attention to the country’s borrowing pattern and its ability to manage increasingly expensive international obligations.

The World Bank’s International Debt Report 2026 puts the country’s external debt at 6.6 per cent above the previous year’s level. More significantly, the latest figure reflects a 74.3 per cent increase over the decade between 2015 and 2025.

In 2015, Nigeria owed external creditors $83.213 billion. Ten years later, that amount had increased by $61.8 billion, illustrating the scale of the country’s expanding foreign debt obligations.

However, the total figure does not tell the entire story. The composition of the debt reveals the different sources of financing and the range of creditors to which Nigeria must meet its obligations.

Public and publicly guaranteed external debt accounted for $62.4 billion. Private nonguaranteed borrowing contributed another $54.476 billion, while short-term external debt stood at $28.139 billion.

The breakdown of public and publicly guaranteed debt also shows that multilateral institutions remain Nigeria’s largest category of official external creditors.

They accounted for $31.365 billion, compared with $24.352 billion owed to private creditors and $6.683 billion owed to bilateral lenders.

Among multilateral institutions, the International Development Association accounted for $18.533 billion. In addition, IMF Special Drawing Rights allocations stood at $5.516 billion.

China remained Nigeria’s largest bilateral creditor, with $5.672 billion in outstanding debt. France followed at $774 million, while other bilateral creditors accounted for $237 million.

This creditor structure matters because borrowing costs, repayment periods and grace periods differ considerably across financing sources.

The World Bank’s figures show that official creditors offered more favourable terms on new commitments in 2025. Their loans carried an average interest rate of 1.9 per cent, a maturity period of 25 years and a five-year grace period.

Private creditors charged considerably more. Their average interest rate stood at 9.6 per cent, while the average maturity period was 12 years and the grace period was eight years.

Consequently, access to private financing can expose borrowing countries to substantially higher interest costs and shorter repayment periods.

Nigeria’s debt indicators nevertheless present a mixed picture. Despite the increase in the total debt stock, external debt relative to exports declined by 4.3 per cent to 212 per cent.

Likewise, the external debt-to-Gross National Income ratio fell by 6.6 per cent to 51 per cent.

Yet the improvement in these indicators did not translate into lower debt-servicing pressure.

Instead, external debt service relative to exports increased by 9.6 per cent to 19 per cent. Debt service as a proportion of Gross National Income also rose by 6.9 per cent to five per cent.

This divergence is significant because a country’s debt position depends not only on how much it owes but also on how much it must pay and whether its foreign earnings can support those payments.

The wider international picture reinforces the concern.

According to the World Bank, low- and middle-income countries paid $1.4 trillion in debt servicing in 2025. The amount marked the fifth consecutive annual increase, with payments rising by 1.9 per cent.

Private creditors, particularly international bondholders, accounted for much of the pressure behind the increase.

Between 2022 and 2025, the countries covered by the report paid approximately $436.1 billion more in debt servicing than they received in new financing.

In practical terms, this meant that debt repayments exceeded fresh financing across the four-year period, limiting the net resources available to those economies.

However, 2025 brought a change in the direction of long-term financing flows. The countries covered by the report recorded a net inflow of $45.4 billion, following a net outflow of $118.4 billion in 2024.

For Nigeria, the figures raise important questions about the relationship between borrowing, investment and repayment capacity.

An expanding debt stock does not automatically indicate an unsustainable debt position. Nevertheless, rising servicing costs can restrict the resources available for infrastructure, healthcare, education and other public priorities.

The central challenge is therefore to ensure that external borrowing generates economic returns capable of supporting future repayments.

Nigeria must also consider the cost of different financing sources, strengthen revenue mobilisation and improve the productivity of investments financed through foreign loans.

Without effective debt management and stronger economic returns, rising repayment obligations could continue to place pressure on public finances.

The World Bank’s latest figures therefore offer more than a record of Nigeria’s growing external liabilities. They provide a wider picture of the financing pressures confronting developing economies and the difficult choices countries must make between borrowing for development and preserving the resources needed to repay their debts.