World Bank Raises Alarm as Developing Countries’ External Debt Hits Record $9.4 Trillion

The World Bank has raised concerns over the rising debt burden of developing countries after their external debt increased by 5.5 per cent to a record $9.4 trillion in 2025.

The increase was driven largely by increased borrowing from private creditors and renewed access to international bond markets, according to the bank’s International Debt Report 2026, released on Thursday, November 5.

The World Bank warned that rising borrowing costs and debt repayment obligations could leave governments with fewer resources to invest in essential services and long-term development projects.

It said the growth in external debt was the fastest since 2021 and about four times the average increase recorded between 2022 and 2024.

The situation was more severe among some of the world’s most vulnerable economies. Countries eligible for concessional financing from the World Bank’s International Development Association recorded an 8.1 per cent increase in external debt to $1.3 trillion.

Haishan Fu, the World Bank Group’s Chief Statistician and Director of Development Data, said the return of private lending was positive but came with significant costs.

“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.

Private creditors drive debt increase

The World Bank identified private creditors as a major contributor to the rise in external borrowing, following the return of several developing economies to international financial markets.

Bond issuance by public entities increased by nearly 35 per cent to $251 billion in 2025, the highest level in five years.

However, the bank noted that some governments used proceeds from new bond sales to repay maturing debts, effectively spreading repayment obligations over longer periods without significantly reducing their overall debt.

Such refinancing arrangements often came with higher interest rates, increasing the cost of servicing existing obligations.

Early 2026 figures also indicate continued demand for international borrowing. By mid-August, more than 10 developing countries had already exceeded their total bond issuance for the whole of 2025, while several others had returned to international markets.

Nigeria’s external debt rises to $54.52 billion

Nigeria’s debt profile reflects some of the pressures highlighted in the World Bank report, as the country continues to rely on external and domestic borrowing to finance government spending.

Data from the Debt Management Office show that Nigeria’s external debt increased to $54.52 billion as of June 30, 2026, from $51.90 billion in March 2026.

This represents an increase of $2.62 billion within three months.

• The country’s external debt has also risen by approximately $11.4 billion since President Bola Tinubu assumed office in May 2023, when it stood at about $43.1 billion.
• The increase has been driven by borrowing from multilateral institutions, including the World Bank, as well as Eurobond issuances and syndicated financing.
• Nigeria’s total public debt stock also climbed to ₦166.79 trillion in June 2026, comprising ₦91.59 trillion in domestic debt and ₦75.19 trillion in external debt.
• The Federal Government is also 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, taxation and agriculture.
• Debt servicing continues to weigh on government finances Beyond the growing debt stock, the cost of servicing Nigeria’s obligations remains a major concern for government finances.

According to Central Bank of Nigeria data, the country spent $5.21 billion servicing external debt in 2025, compared with $4.66 billion in 2024.

The figure represents an increase of 11.9 per cent within one year.

External debt payments accounted for 72.11 per cent of Nigeria’s total international payments in 2025, meaning that nearly three out of every four dollars paid externally went towards servicing foreign debt.

Interest payments also increased by 12.2 per cent to $1.11 billion during the six-month period covered in the report, accounting for 61.1 per cent of total external debt service. Eurobond investors received $645.16 million, making them the largest single creditor group.

Domestic borrowing has also attracted substantial servicing costs. The Debt Management Office reported that Nigeria spent ₦5.28 trillion servicing domestic debt in the first half of 2026, with ₦4.95 trillion going towards interest and rental payments.