World Bank raises alarm as developing countries’ external debt hit record $9.4 trillion

The World Bank has expressed concerns as external debt owed by developing countries rose 5.5% to a record $9.4 trillion in 2025, pushed by increased borrowing from private creditors and renewed access to international bond markets pushed up debt levels.

The Bank disclosed this in its International Debt Report 2026, released on Thursday, November 5, warning that higher borrowing costs and mounting debt-service obligations could leave governments with fewer resources for essential development investments.

According to the Bank, the increase was the fastest since 2021 and approximately four times the average growth recorded between 2022 and 2024, highlighting the growing financing pressures facing developing economies despite improved access to international capital.

Debt grew even faster among the most vulnerable economies, with external debt in countries eligible for concessional financing from the World Bank’s International Development Association (IDA) rising 8.1% to $1.3 trillion.

Private creditors drive increase in external debt

Private creditors accounted for much of the increase in developing countries’ external debt as international financial markets reopened to several emerging and developing economies.

• “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,” said Haishan Fu, World Bank Group Chief Statistician and Director of Development Data.

Bond issuance by public entities rose nearly 35% to $251 billion in 2025, its highest level in five years.

However, the World Bank noted that some governments used proceeds from new bond issuances to buy back maturing debt, helping to spread repayment obligations over longer periods without substantially reducing overall debt stocks.

• These refinancing transactions often came at higher interest rates, increasing the cost of servicing the debt.

Early 2026 data also indicate that demand for international bond financing has remained strong despite elevated borrowing costs. By mid-August, more than 10 developing countries had already exceeded their full-year 2025 bond issuance, while several others returned to international markets.

Nigeria’s external debt rises to $54.52 billion

Nigeria’s borrowing profile reflects some of the pressures highlighted in the World Bank report, with external debt increasing alongside domestic obligations as the Federal Government continues to rely on multilateral lenders, international capital markets and domestic securities to finance its spending.

• Data from the Debt Management Office (DMO) show that Nigeria’s external debt stock increased to $54.52 billion as of June 30, 2026, from $51.90 billion in March 2026, representing an increase of $2.62 billion in three months.
• The country’s total external debt also increased from approximately $43.1 billion when President Bola Tinubu assumed office in May 2023, representing an addition of about $11.4 billion by June 2026.
• According to Nairametrics’ earlier analysis, the increase has been driven by greater borrowing from multilateral institutions, particularly the World Bank, as well as Eurobond issuances and syndicated financing.
• Nigeria’s total public debt stock also rose to N166.79 trillion as of June 2026, comprising N91.59 trillion in domestic debt and N75.19 trillion in external debt.

The Federal Government has also been seeking additional external financing, including a proposed $1.25 billion World Bank loan to support reforms in areas such as access to finance, digital services, electricity, tax and agriculture.

Debt servicing continues to weigh on government finances

Beyond the growth in outstanding debt, the cost of servicing Nigeria’s obligations remains a major fiscal concern.

Nigeria spent $5.21 billion servicing external debt in 2025, up from $4.66 billion in 2024, representing an 11.9% increase, according to data from the Central Bank of Nigeria (CBN).

• The payments accounted for 72.11% of the country’s total international payments in 2025, meaning nearly three out of every four dollars paid externally went towards servicing foreign debt obligations.
• However, interest payments increased by 12.2% to $1.11 billion, accounting for 61.1% of total external debt service during the six-month period. Eurobond investors received $645.16 million, making them the largest single creditor group.

Domestic borrowing has also generated significant servicing costs. The DMO reported that Nigeria spent N5.28 trillion servicing domestic debt in the first half of 2026, with N4.95 trillion going towards interest and rental payments.