Nigeria’s debt servicing burden deepens as external debt hits $145bn
…World Bank data show 74.3% decade-long debt increase
Nigeria’s external debt stock climbed to $145.02 billion in 2025, an increase of 6.6 per cent from the previous year, while rising debt-servicing costs continued to put pressure on the country’s foreign exchange earnings and fiscal capacity.
The increase, equivalent to about $61.8 billion over the past decade, underscores the growing weight of Nigeria’s external obligations, even as some key debt sustainability indicators recorded improvements.
The figures are contained in the World Bank’s International Debt Report 2026, which put Nigeria’s external debt at $83.21 billion in 2015. The latest level represents a 74.3 per cent increase over the 10 years.
A breakdown of the 2025 debt stock shows that public and publicly guaranteed debt accounted for $62.4 billion, while private nonguaranteed debt stood at $54.48 billion. Short-term external debt amounted to $28.14 billion.
Within the public and publicly guaranteed component, multilateral creditors held the largest exposure at $31.37 billion, followed by private creditors at $24.35 billion and bilateral lenders at $6.68 billion.
The World Bank’s International Development Association (IDA) accounted for $18.53 billion of Nigeria’s multilateral debt, while International Monetary Fund (IMF) Special Drawing Rights allocations stood at $5.52 billion.
China remained Nigeria’s largest bilateral creditor, with $5.67 billion outstanding, followed by France at $774 million and other bilateral creditors at $237 million.
The composition of the debt highlights Nigeria’s substantial reliance on multilateral financing, while its obligations to private creditors and the short-term debt component also remain important considerations for external liquidity management.
More concerning, however, is the rising cost of servicing the debt.
The World Bank data showed that Nigeria’s external debt service-to-exports ratio increased by 9.6 per cent to 19 per cent in 2025. Debt service as a proportion of Gross National Income (GNI) also rose by 6.9 per cent to five per cent.
The development means a larger share of the country’s foreign exchange earnings and national income is being committed to meeting debt obligations, potentially limiting the resources available for infrastructure, social services and other development priorities.
Although the country recorded improvements in two other debt indicators, the rising servicing burden points to the difference between the size of a country’s debt and its capacity to meet repayment obligations without constraining economic activity.
External debt relative to exports declined by 4.3 per cent to 212 per cent, while the debt-to-GNI ratio fell by 6.6 per cent to 51 per cent.
These improvements suggest a better relationship between the debt stock and the country’s export earnings and national income. However, the increase in debt service ratios indicates that repayment pressures remain significant.
Nigeria’s position also reflects a wider challenge confronting developing economies. The World Bank reported that debt-service payments by low- and middle-income countries reached $1.4 trillion in 2025, extending the increase for a fifth consecutive year.
Payments rose by 1.9 per cent, driven largely by obligations to private creditors, particularly international bondholders.
Between 2022 and 2025, countries covered by the report paid approximately $436.1 billion more in debt servicing than they received in new financing. The trend reversed in 2025, when long-term debt flows recorded a net inflow of $45.4 billion, compared with a net outflow of $118.4 billion in 2024.
The report also highlighted the substantial difference between borrowing costs from official and private creditors.
New commitments from official creditors in 2025 carried an average interest rate of 1.9 per cent, with a maturity of 25 years and a five-year grace period. Private creditors, however, charged an average interest rate of 9.6 per cent, with a 12-year maturity and an eight-year grace period.
The gap reinforces the financial advantage of concessional and multilateral financing over more expensive commercial borrowing, particularly for countries facing foreign exchange constraints.
For Nigeria, the challenge is not merely to contain the growth of external debt but to ensure that borrowed funds generate returns capable of supporting repayment. Investments in export-oriented production, power, transport infrastructure and manufacturing could strengthen foreign exchange earnings and reduce pressure on public finances.
With external debt service consuming a rising share of export proceeds, the sustainability of Nigeria’s borrowing strategy will increasingly depend on the productivity of financed projects, stronger non-oil exports and the ability to convert borrowed resources into durable economic growth.
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