World Bank: developing countries' external debt hits record $9.4tn

The World Bank says the external debt of developing countries rose 5.5 per cent to a record $9.4tn in 2025, the fastest increase since 2021 and about four times the average growth between 2022 and 2024.

The bank said this in its International Debt Report 2026, released on Thursday. It warned that higher borrowing costs and heavy repayment obligations are leaving governments with less money for schools, health and other development needs.

The rise was driven largely by private lenders and international bond markets. Bond issuance by public entities jumped nearly 35 per cent to $251bn, the highest in five years.

For Nigeria, the report reflects a familiar squeeze. Debt Management Office (DMO) figures show the country's external debt rose to $54.52bn as of June 30, 2026, from $51.90bn in March, an increase of $2.62bn in three months.

That is about $11.4bn more than the roughly $43.1bn recorded when President Bola Tinubu took office in May 2023. Nigeria's total public debt stood at ₦166.79tn as of June 2026, made up of ₦91.59tn domestic and ₦75.19tn external debt.

Why it matters for Nigerians

Debt service is eating into money that could go into services. Central Bank of Nigeria (CBN) data show Nigeria spent $5.21bn servicing external debt in 2025, up 11.9 per cent from $4.66bn in 2024. That was 72.11 per cent of all the country's international payments for the year, meaning nearly three of every four dollars paid abroad went to foreign debt.

Domestic borrowing is also costly. The DMO said Nigeria spent ₦5.28tn servicing domestic debt in the first half of 2026, with ₦4.95tn of that going to interest and rental payments.

The World Bank's chief statistician, Haishan Fu, said the return of private lending to low- and middle-income countries is welcome, but added: "these countries are borrowing more, paying more, and in many cases leaving less for long-term development."

The report said the most vulnerable economies are hurting most. External debt for countries eligible for concessional financing from the bank's International Development Association (IDA) rose 8.1 per cent to $1.3tn. Those countries paid an average of 8.2 per cent on new private loans in 2025, the highest since 1989.

Across low- and middle-income countries, repayments of principal and interest reached $1.4tn in 2025, up 1.9 per cent and the fifth straight annual rise. Between 2022 and 2025, the bank said, developing countries paid $436bn more in debt service than they received in new financing.

The bank also noted that many governments issued new bonds to buy back maturing debt, spreading repayments over longer periods but often at higher interest rates, so the overall debt pile barely shrank.

Early 2026 data suggest demand for international bond financing remains strong despite the cost. By mid-August, more than 10 developing countries had already exceeded their full-year 2025 bond issuance.

What happens next

The Federal Government is still seeking more external financing, including a proposed $1.25bn World Bank loan to support reforms in access to finance, digital services, electricity, tax and agriculture. With debt service already taking most of Nigeria's external payments, the pressure on the 2027 budget and on the naira is likely to stay in focus.