Developing nations, Nigeria among them, are grappling with a record external debt of $8.9 trillion in 2024, the World Bank said in its most recent International Debt Report.
This marks an unprecedented debt load and highlights growing financial strain on public finances in low- and middle-income economies.
The report noted that between 2022 and 2024, these countries paid $741 billion more in principal and interest than they received in new financing, the largest shortfall in at least half a century.
This mismatch has raised concerns among global lenders and investors about debt sustainability.
Although global interest rates peaked and some bond markets reopened in 2024, easing pressures slightly, the overall debt outlook remains fragile, the World Bank said.
Many countries managed to avoid defaults by restructuring about $90 billion in external debt, the largest such effort since 2010.
Private bondholders also contributed $80 billion in net new financing, but at elevated interest rates averaging around 10 per cent — approximately double the pre-2020 average.
World Bank Group Chief Economist Indermit Gill stressed that the temporary easing of financial conditions should not lull policymakers into complacency.
He urged governments to use the reprieve to strengthen their fiscal positions rather than hastily return to external borrowing.
Nigeria, classified as eligible for concessional financing under the World Bank’s International Development Association (IDA), continues to be one of the larger borrowers from the Bank.
In 2024, the World Bank extended $18.3 billion more in new financing than it received in repayments from IDA-eligible countries, alongside a record $7.5 billion in grants.
By mid-2025, Nigeria’s external debt stood at roughly $47 billion, up from about $46 billion earlier in the year, according to the Debt Management Office.
The report also highlighted the social costs of high debt levels.
In 2024, developing economies paid a record $415 billion in interest alone, funds that might otherwise have been spent on education, healthcare, and critical infrastructure projects.
In countries with external debt exceeding 200 per cent of export revenue, more than half of the population cannot afford the minimum daily diet necessary for long-term health. In IDA-eligible nations, which include Nigeria, nearly two-thirds of residents face the same challenge.
A further trend identified in the report was a growing reliance on domestic financing.
Of 86 countries with available data, most saw domestic government debt grow more quickly than external debt in 2024.
While this reflects developing local capital markets, heavy domestic borrowing carries risks such as crowding out private-sector lending and higher refinancing costs due to shorter maturities.
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