Nigeria Faces Debt Crisis: World Bank Demands Urgent Fiscal Reforms

The World Bank has warned that Nigeria and several Sub-Saharan African (SSA) nations must prioritize export diversification and fiscal reforms. According to the International Debt Report 2025, these measures are essential to combat a deepening debt crisis that has outpaced economic growth.

The report identifies Sub-Saharan Africa as a global outlier. In this region, debt levels and servicing costs continued to rise through 2024, despite sluggish GDP growth. The World Bank noted that regional debt has been driven by official financing rather than productive investment.

Nigeria’s Rising Debt Profile

Nigeria’s total public debt reached N152.39 trillion ($99.65 billion) in the second quarter of 2025. This marks a 2.01% increase from the N149.38 trillion ($97.23 billion) recorded in the first quarter of the year.

Financial analysts are concerned about this trajectory, as the government continues to borrow to fund budget deficits. Projections from the Budget Office of the Federation indicate a plan to borrow an additional N17.89 trillion in 2026.

Sub-Saharan Africa: Fiscal Stress and Divergence

The World Bank highlighted a sharp divergence between SSA and other global regions since the COVID-19 pandemic. While other areas stabilized, external debt in SSA grew annually even as economic output lagged.

Key Findings for the SSA Region:

• Persistent Fiscal Stress: Debt servicing burdens are rising despite subdued growth.
• Crowding Out Services: High debt is diverting funds from health, education, and infrastructure.
• Systemic Fragility: Countries with weaker institutions face elevated vulnerability to nutrition insecurity.

High-Cost International Borrowing

To bridge its budget gap, Nigeria raised $2.2 billion in Eurobonds in 2024 with yields as high as 10.375%. While this shows a return of investor confidence, the rates are at elevated levels not seen since the 2008 financial crisis.

Furthermore, the World Bank warns that principal repayments for Low-Income Countries are expected to jump by 87.5% by 2026. This creates a potential “repayment wall” that could severely strain national budgets.

Nigeria as a Major Multilateral Borrower

Despite these challenges, Nigeria posted a significant current account surplus in 2024. However, it remains classified as high-risk alongside nations like Kenya and Zambia.

Nigeria stands as one of the largest recipients of World Bank credit. In 2024, net flows from the bank reached a record $36 billion, with Nigeria, Bangladesh, and Ukraine being among the top beneficiaries.

While these funds provide a lifeline, the World Bank emphasizes that long-term stability requires internal fiscal discipline and a shift away from oil-dependency.

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