Debt: W’Bank urges Nigeria, others to rethink exports

The World Bank has warned that Nigeria and other Sub-Saharan African countries must initiate export diversification and fiscal reforms to address their rising debt challenges.

This was contained in its just-released International Debt Report 2025.

The report, which highlights Sub-Saharan Africa as an outlier where debt levels and servicing costs climbed through 2024 amid subdued GDP, driven by countercyclical official financing rather than investment, notes that Nigeria and other countries in the region’s external debt burdens continued rising despite sluggish growth.

Nigeria’s public debt stock, which includes external and domestic debt, rose 2.01 per cent quarter-on-quarter to N152.39tn (US$99.65bn) in the second quarter of 2025 from N149.38 trillion (US$97.23bn) in Q1 2025.

Financial analysts have raised concerns over the country’s debt profile, as the government continue to borrow to fund the budget deficit.

The government plans to borrow N17.89tn in 2026, according to the 2026 budget framework obtained from the Budget Office of the Federation, having recently obtained approvals for N1.15tn domestic loans in late 2025 for the 2025 budget.

According to the World Bank, Sub-Saharan Africa diverged from other regions post-COVID, with external debt stocks growing year-on-year even as output lagged, per regional trends from 2015-2024.

Sub-Saharan Africa stands out as an exception, both debt levels… and servicing burdens have continued to rise even as growth remains subdued, underscoring persistent fiscal stress,” the report states. Negative correlations between GDP growth and debt accumulation sharpened in SSA during 2020-2024, with 64 per cent of LMICs showing this pattern continent-wide.

The report noted that high debt amplified SSA vulnerabilities, crowding out health, education, and infrastructure while linking to nutrition insecurity and institutional weakness.

“High external debt burdens are also associated with broader systemic fragility, because countries with weaker institutions… face elevated vulnerability,” warns the analysis. LMIC growth dips to 4.3 per cent in 2025 amid trade tensions.

Meanwhile, Nigeria raised $2.2bn in Eurobonds in 2024 at yields of 9.625 per cent and 10.375 per cent to fund its budget deficit, marking its return to international markets after a year-long pause.

According to the World Bank, IDA-eligible issuances like Nigeria’s and Kenya’s $1.5bn Eurobond (9.75 per cent coupon) reflect renewed investor confidence, but at elevated rates unseen since pre-2008 crisis levels—low- and medium-income countries’ private creditor commitments averaged 5.89 per cent in 2024.

“Nigeria successfully raised US$2.2bn in Eurobonds to help fund its budget deficit,” the report notes, amid Sub-Saharan Africa bond flows jumping 55.6 per cent to $27.7bn. Yet principal repayments loom large, up 87.5 per cent in LICs by 2026.

According to the World Bank, Nigeria posted one of Africa’s largest current account surpluses in 2024 alongside Djibouti and Angola, bucking LMIC deficits, yet clusters with high-risk peers like Kenya, Mozambique, and Zambia.

As of 2024, 23 LMICs had current account surpluses—the largest were in Africa (Djibouti, Nigeria, and Angola), followed by several countries in Europe and Central Asia (Azerbaijan and Tajikistan),” the report emphasised.

It stated that Nigeria ranked among the top International Development Association-eligible borrowers, receiving World Bank inflows alongside Bangladesh, Kenya, and Pakistan.

The World Bank revealed that Nigeria was one of the major beneficiaries of the record credit from multilateral creditors, which hit US$36bn in 2024, having risen by 30.4 per cent during this period.

“Multilateral creditors continued to provide the most support to LMICs, albeit at a much slower pace following the unprecedented support provided during the COVID-19 pandemic, recording US$70.1bn in net debt inflows in 2024. Net debt flows from multilateral creditors decreased 5.1 per cent in 2024 and accounted for 48.5 per cent of net long-term debt inflows to LMICs.

“Despite the overall decrease, net flows from the World Bank (International Bank for Reconstruction and Development and International Development Association lending) reached an all-time high of $36bn, increasing 30.4 per cent in 2024. They accounted for 51.3 per cent of net flows from multilateral institutions. Bangladesh, Kenya, Nigeria, the Philippines, and Ukraine were the largest recipients of these funds. The second-largest net debt flows by volume in 2024 came from the European Union, at US$15.5bn, driven largely by support provided to Ukraine,” the report highlighted.

Culled from punch