..World Bank Warns Rising Debt Repayments Are Squeezing Funds For Healthcare, Education, Infrastructure.
…FG’s $5bn Swap Deal Raises Fresh Questions Over $6.7bn Collateral And Transparency Risks.
….Country’s Foreign Debt Jumps By $61.8bn In 10 Years
Daud Olatunji
Nigeria’s external debt stock has climbed to $145.02bn as of December 2025, representing a 6.6 per cent increase from the previous year, with the World Bank warning that the country and other developing economies are increasingly spending more on debt repayment at the expense of critical development needs.
The latest figure, contained in the World Bank’s International Debt Report 2026, indicates that Nigeria’s external debt has increased by approximately $61.8bn over the past decade, rising from $83.21bn in 2015 to $145.02bn in 2025.
The report, released on Thursday, November 5, 2026, provides an assessment of external borrowing among low- and middle-income countries and highlights the growing financial pressure associated with accessing international credit.
According to the report, Nigeria’s total external debt stood at $145.015bn, comprising $62.4bn in public and publicly guaranteed debt, $54.476bn in private nonguaranteed debt and $28.139bn in short-term obligations.
The figures indicate that less than half of the country’s external debt is directly attributable to public and publicly guaranteed borrowing, while private sector obligations without government guarantees and short-term liabilities account for a substantial share.
The World Bank explained that public and publicly guaranteed debt covers obligations owed by government institutions, including the Federal Government and state-owned enterprises, as well as private sector loans backed by government guarantees.
Private nonguaranteed debt, however, refers to external obligations incurred by private borrowers without public guarantees.
Beyond the rising debt stock, the report raised concerns over Nigeria’s debt-servicing burden, noting that some of the country’s external debt indicators deteriorated in 2025.
It put Nigeria’s external debt-to-exports ratio at 212 per cent, while its external debt-to-gross national income ratio stood at 51 per cent.
The country’s debt-service-to-exports ratio was 19 per cent, while debt servicing as a proportion of gross national income stood at five per cent.
Although the debt-to-exports and debt-to-GNI ratios declined by 4.3 per cent and 6.6 per cent respectively compared with their 2024 levels, the debt-service-to-exports ratio increased by 9.6 per cent, while debt service relative to GNI rose by 6.9 per cent.
The development suggests that despite some improvement in the relationship between Nigeria’s external debt and its economic output and export earnings, the cost of meeting repayment obligations continued to increase.
The World Bank warned that rising debt-service payments were putting developing economies under considerable pressure, with low- and middle-income countries collectively paying $1.4tn in debt servicing in 2025.
The amount represented a 1.9 per cent increase during the year, driven largely by payments to private creditors, particularly international bondholders.
Between 2022 and 2025, the countries covered by the report paid approximately $436.1bn more in debt servicing than they received in new financing.
In the report’s foreword, the World Bank’s Chief Statistician, Haishan Fu, described the situation as a troubling paradox in which developing economies were securing more international financing but paying increasingly higher costs to access it.
“Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development,” Fu said.
He warned that increasing debt-service obligations were consuming funds that could otherwise be channelled into infrastructure, job creation, education, healthcare and other development priorities.
“The objective should, therefore, not be more debt. It should be better financing that is affordable, transparent, sustainable, and capable of supporting investment and growth,” he added.
The report also highlighted Nigeria’s return to the international bond market in 2025, when the Federal Government raised $2.3bn through a dual-tranche sovereign bond issuance.
Nigeria emerged as the third-largest issuer among Sub-Saharan African countries eligible for International Development Association financing during the period.
The bond issuance comprised a 10-year instrument carrying an interest rate of 8.625 per cent and a 20-year bond with an interest rate of 9.125 per cent.
The World Bank noted that although Nigeria’s return to the international capital market demonstrated continued access to foreign financing, the interest rates reflected the relatively high cost of borrowing from private international investors.
Across IDA-eligible countries, the average interest rate on new commitments from private creditors rose to 8.2 per cent in 2025, the highest level since the late 1980s.
In contrast, the average interest rate on new commitments from official creditors remained relatively stable at 2.7 per cent between 2024 and 2025.
The difference between private and official borrowing costs widened to 5.5 percentage points in 2025, compared with 3.4 percentage points in 2016.
Nigeria’s country profile further showed that its average interest rate on new official external debt commitments stood at 1.9 per cent in 2025, compared with 9.6 per cent for private creditors.
While official borrowing commitments had an average maturity of 25 years and a five-year grace period, private creditor commitments carried an average maturity of 12 years and an eight-year grace period.
The figures underscore the substantially higher interest costs associated with Nigeria’s reliance on private international lenders.
$5bn swap deal raises transparency concerns
In another significant revelation, the World Bank identified Nigeria among countries that have increasingly resorted to a complex financing arrangement known as a Total Return Swap (TRS).
Others identified include Angola, Argentina, Colombia and Senegal.
The report disclosed that Nigeria entered into a $5bn Total Return Swap transaction in 2026, with a three-year maturity and a collateralisation ratio of approximately 133 per cent.
Under the arrangement, Nigeria reportedly pledged domestic securities worth approximately $6.7bn as collateral to secure the $5bn financing.
The World Bank explained that such arrangements allow governments to obtain foreign currency liquidity by using government securities or other assets as collateral.
Although the arrangement could provide immediate access to foreign currency and potentially offer lower short-term financing costs than conventional borrowing, the bank warned that it also exposes governments to collateral, margin-call, refinancing and transparency risks.
It further cautioned that the growing use of such financing arrangements could make it difficult to establish the full extent of governments’ financial obligations if they were not adequately disclosed.
According to the report, where a sovereign borrower receives funds upfront and is unconditionally required to repay them, the transaction constitutes debt, even where it contains a derivative component.
The World Bank consequently recommended that governments provide comprehensive disclosures on the amount borrowed, maturity period, collateralisation ratio, type of assets pledged, margin requirements and repayment obligations.
It warned that inadequate disclosure could prevent citizens, investors and other stakeholders from understanding the full extent of a country’s financial exposure.
Nigeria’s rising external debt forms part of a broader increase in international borrowing among developing economies, several of which recorded significant increases in their debt stocks in 2025.
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