Despite the Federal Government’s continued borrowing under President Bola Tinubu’s administration, Nigeria spent approximately $5.15 billion servicing its external debt in 2025, about $490 million more than the amount recorded in the preceding year.
According to the World Bank Group’s International Debt Report 2026, Nigeria’s external debt grew by 13.3 per cent in 2025, more than twice the 5.5 per cent average increase recorded across developing countries.
The World Bank warned that mounting external obligations and rising borrowing costs are increasingly threatening development financing in vulnerable economies such as Nigeria, as more government resources are committed to meeting debt obligations.
In the report released on Thursday, the World Bank disclosed that external debt owed by developing countries surged to a record $9.4 trillion in 2025, representing the fastest growth since 2021 and approximately four times the average increase recorded between 2022 and 2024.
Nigeria’s position presents a significant national dimension to the global findings, with figures from the Debt Management Office (DMO) showing that the country’s public external debt stock increased from $45.78 billion at the end of December 2024 to $51.86 billion by December 2025.
The increase of approximately $6.08 billion represents a 13.3 per cent growth, substantially above the developing-country average reported by the World Bank.
The faster accumulation of external obligations also comes with increasing repayment costs. Nigeria’s external debt-service payments rose from approximately $4.66 billion in 2024 to $5.15 billion in 2025, representing an increase of about 10.6 per cent, according to the figures cited in the debt analysis.
This means the country spent approximately $490 million more on servicing its external debt in 2025 than in the preceding year, adding to the demands on its foreign exchange resources.
The development highlights the growing pressure on Nigeria’s foreign exchange earnings, particularly at a time when the government is pursuing economic reforms aimed at improving revenue generation, stabilising the naira and strengthening the country’s capacity to meet its financial obligations.
Unlike domestic borrowing, which is largely serviced in naira, external debt repayments require foreign currencies, principally the US dollar. This makes the cost of servicing such obligations particularly sensitive to movements in the exchange rate and the availability of foreign exchange.
The World Bank report identified private creditors as a major driver of the global debt increase, noting that borrowing from private lenders expanded as international bond markets reopened to developing economies.
Public-sector bond issuance rose by nearly 35 per cent to $251 billion in 2025, the highest level in five years.
Nigeria’s debt composition similarly reflects substantial exposure to both multilateral and commercial financing.
According to the DMO, multilateral creditors accounted for approximately $23.85 billion, representing 45.99 per cent of the country’s external debt at the end of 2025. Bilateral creditors held $6.72 billion, or 12.97 per cent, while Eurobond obligations stood at approximately $18.55 billion, representing 35.77 per cent.
The multilateral component includes financing from institutions such as the World Bank and African Development Bank, while Eurobonds represent Nigeria’s access to international capital markets.
The composition underscores the importance of both official development financing and commercial borrowing in Nigeria’s external debt portfolio.
Multilateral loans generally provide access to longer-term financing, often with more favourable repayment conditions than commercial borrowing. Such facilities are particularly important for developing countries seeking resources for infrastructure, social development and economic transformation.
However, commercial borrowing through Eurobonds exposes governments to market conditions, including international interest rates, investor confidence and the country’s perceived credit risk.
Nigeria’s reliance on both sources therefore makes the management of borrowing costs and repayment schedules an important consideration in its fiscal planning. The DMO figures, however, do not establish how much of the year-on-year increase was specifically attributable to new drawdowns from each creditor category.
The World Bank’s concern extends beyond the size of developing countries’ debt to the increasingly expensive terms on which some economies access international financing.
Countries eligible for concessional financing from the Bank’s International Development Association (IDA) paid an average interest rate of 8.2 per cent on new private-creditor commitments in 2025, the highest since 1989, while their average rate on new bonds stood at 9.4 per cent.
The report further disclosed that external debt among IDA-eligible countries increased by 8.1 per cent to $1.3 trillion, exceeding the overall developing-country growth rate.
Although these borrowing rates are specific to IDA-eligible countries and do not represent Nigeria’s actual average borrowing costs, they demonstrate the difficult financing environment confronting developing economies.
For countries with substantial financing requirements, higher interest rates mean that a larger proportion of government revenue must be devoted to debt servicing, leaving less room for capital expenditure and essential public services.
The World Bank also highlighted the role of currency movements in increasing reported debt obligations, explaining that a weaker US dollar raised the dollar value of debt denominated in other currencies.
For several major concessional borrowers, the currency effects outweighed principal repayments made during 2025.
For Nigeria, the implications are particularly important because exchange-rate movements can increase the naira cost of servicing foreign-currency obligations, even where the dollar value of the underlying debt remains unchanged.
Nigeria’s total public debt stood at N159.28 trillion, equivalent to $110.97 billion, at the end of December 2025, according to the DMO. External obligations accounted for N74.43 trillion, representing 46.73 per cent of the total, while domestic debt stood at N84.85 trillion.
The figures show that external borrowing remains a substantial component of the country’s overall debt portfolio, although domestic obligations account for the larger share.
The increase in the naira value of external debt also illustrates the exposure of public finances to exchange-rate movements. When the naira depreciates against the dollar, the government requires more local currency to meet the same dollar-denominated repayment obligations.
At the global level, the World Bank disclosed that low- and middle-income countries paid a combined $1.4 trillion in principal and interest in 2025, marking a fifth consecutive annual increase.
Between 2022 and 2025, developing countries paid $436 billion more in debt service than they received in new financing, raising concerns about the resources available for infrastructure, healthcare, education and other development priorities.
The trend suggests that several developing economies are increasingly using a substantial portion of their financial resources to meet existing obligations rather than directing them towards new investments capable of stimulating economic growth.
Commenting on the findings, World Bank Group Chief Statistician and Director of Development Data, Haishan Fu, said the return of private lending to low- and middle-income countries was welcome but warned that increased borrowing costs could undermine long-term development.
“The return of private lending to low- and middle-income countries is welcome, but these countries are borrowing more, paying more, and in many cases leaving less for long-term development,” Fu said.
He stressed that responsible debt management must give everyone, including future generations, an opportunity to thrive.
For Nigeria, the combination of faster external debt accumulation, increasing debt-service payments and exchange-rate exposure raises important questions about fiscal sustainability and the country’s capacity to maintain development spending while meeting its international obligations.
The challenge is not necessarily the accumulation of debt itself, but whether borrowed funds generate sufficient economic returns to justify their costs.
External loans used to finance productive infrastructure, improve electricity supply, expand transportation networks and strengthen industrial capacity could support economic growth and increase government revenue over time. Investments that boost exports and foreign exchange earnings could also improve the country’s ability to meet dollar-denominated obligations.
However, borrowing without corresponding improvements in productive capacity and revenue generation risks increasing repayment pressures without creating sufficient resources to meet them.
With Nigeria spending more on external debt servicing in 2025, the effectiveness of its borrowing strategy will increasingly be measured by the economic benefits generated from the funds raised.
The central challenge for the Tinubu administration is ensuring that additional external borrowing translates into productive investments that expand economic output, strengthen foreign exchange earnings and improve government revenue, rather than placing an increasingly heavy burden on future budgets.
