The World Bank has disclosed that three major developing economies—Nigeria, Bangladesh, and Pakistan—now collectively hold close to 30% of the total external debt owed by countries eligible for International Development Association (IDA) financing. The figures were contained in the International Debt Report 2025, released by the global lender on Wednesday, offering fresh insight into the evolution of debt patterns among lower-income and emerging economies.
According to the report, the concentration of external debt among a small group of IDA countries has grown significantly in recent years, amid increased reliance on multilateral loans and limited access to affordable market financing. The findings come at a time when global financing conditions remain tight, and concerns over sustainability are rising, especially for highly indebted nations with narrow revenue bases.
Widening Debt Concentration and Changing Patterns of External Borrowing
The World Bank report notes that despite shifts in the global economic landscape, the fundamental structure of long-term external debt among IDA borrowers has remained relatively stable over the past decade. Public and publicly guaranteed (PPG) debt—which includes sovereign borrowing and private loans backed by government guarantees—still accounts for 75% of total IDA-eligible external debt, while private non-guaranteed (PNG) debt represents 25%.
In 2024, the stock of PPG debt grew 2.8% to $816.5 billion, reflecting continued dependence on official lending and the limited ability of many low-income economies to access private capital without sovereign backing. In contrast, PNG debt recorded a slight decline, falling to $241.9 billion, a trend driven by weaker private sector borrowing and risk aversion among global lenders.
The report also highlights an increasingly concentrated debt profile, where just seven countries out of the top ten borrowers now hold more than half of all IDA-eligible external debt. The list of the ten largest borrowers includes China, India, Brazil, Mexico, Türkiye, Indonesia, Argentina, Colombia, Ukraine, and Thailand. While Nigeria, Pakistan, and Bangladesh do not appear in the top ten globally, they collectively dominate the debt profile for IDA-eligible economies.
Sharp Increase in Debt Inflows Driven by Short-Term Borrowing
Debt inflows to IDA-eligible countries surged in 2024, with net debt inflows rising 18.6% to $53.1 billion. The World Bank attributes this increase to a dramatic shift in short-term debt flows, which moved from an outflow position of $10.6 billion in 2023 to an inflow of $5.6 billion in 2024. This reversal reflects short-term borrowing pressures to support balance of payment needs, manage currency stability, and fund essential imports in the face of rising global inflation.
Long-term debt inflows, however, fell 14.4%, though they remained positive at $47.4 billion, still higher than in 2022. The report reveals that long-term flows to PNG borrowers turned negative for the first time in decades, moving from an inflow of $7.3 billion to an outflow of $567 million. The World Bank attributes this shift to reduced appetite among commercial banks and private creditors, whose combined net flows turned negative for the first time since 1999.
Rising Concerns for Nigeria’s Fiscal Outlook
The report amplifies growing concern among analysts that Nigeria’s public debt has reached levels that could undermine fiscal stability if reforms fail to accelerate. With Nigeria now ranking among the three largest IDA-eligible borrowers, its borrowing concentration raises policy questions about the sustainability of external debt servicing and the country’s vulnerability to exchange rate shocks and tightening conditions in global financial markets.
Financial experts have repeatedly warned that Nigeria’s public debt trajectory is approaching critical thresholds, where debt servicing could significantly crowd out essential spending on health, education, infrastructure, and social programmes. The report notes that countries like Nigeria must deepen debt transparency, strengthen domestic revenue mobilization, and adopt more prudent borrowing strategies to reduce exposure.
Nigeria’s Debt Position Continues to Rise
Data from the Debt Management Office (DMO) shows that Nigeria’s total public debt climbed to ₦152.39 trillion in the second quarter of 2025, up from ₦149.38 trillion recorded in Q1. The country’s external debt stood at $46.98 billion (₦71.85 trillion) in June 2025, a rise from $45.98 billion (₦70.63 trillion) recorded in March.
Debt servicing costs have also increased. The DMO reported that Nigeria spent $932.1 million servicing external debt in Q2 2025, reflecting pressures from currency depreciation and rising global interest rates.
Need for Policy Action
With debt concentration intensifying, the World Bank urges vulnerable economies—including Nigeria—to enhance fiscal discipline, improve the efficiency of public spending, and embrace reforms targeted at expanding domestic revenue sources. The report argues that without decisive policy action, rising debt could stifle long-term growth and limit access to development financing needed for poverty reduction.
Emmanuel Bassey is a Financial Expert that has worked in the Banking and Finance Industry for over 15+ years across different banks in Nigeria
