High Debt Servicing and Slow Growth Deepen Fiscal Strain Across Sub-Saharan Africa
The World Bank has warned that Nigeria and other Sub-Saharan African countries must urgently pursue export diversification and comprehensive fiscal reforms to rein in rising debt levels and mounting servicing costs.
The warning is contained in the World Bank’s newly released International Debt Report 2025, which describes Sub-Saharan Africa as a global outlier where debt burdens continued to rise through 2024 despite weak economic growth.
According to the report, debt accumulation in the region has been driven largely by countercyclical official financing rather than productive investment, leaving countries such as Nigeria with growing external obligations amid subdued output.
Nigeria’s total public debt stock covering both domestic and external borrowings rose by 2.01 per cent quarter-on-quarter to ₦152.39 trillion ($99.65bn) in the second quarter of 2025, up from ₦149.38 trillion ($97.23bn) in the first quarter.
The rising debt profile has sparked concern among financial analysts, particularly as the Federal Government continues to rely on borrowing to bridge persistent budget deficits.
Documents from the Budget Office of the Federation show that the government plans to borrow ₦17.89 trillion in 2026, following recent approvals for ₦1.15 trillion in domestic loans toward financing the 2025 budget.
The World Bank noted that, unlike other regions that began stabilising after the COVID-19 shock, Sub-Saharan Africa continued to record year-on-year growth in external debt between 2015 and 2024, even as economic output lagged.
“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 stated.
The analysis further showed that between 2020 and 2024, negative correlations between GDP growth and debt accumulation intensified across the region, with about 64 per cent of low- and middle-income countries in Africa exhibiting this trend.
The report warned that elevated debt levels are amplifying vulnerabilities across the region by crowding out spending on health, education and infrastructure, while also contributing to food insecurity and institutional fragility.
“High external debt burdens are associated with broader systemic fragility, as countries with weaker institutions face heightened vulnerability,” the World Bank cautioned, noting that growth across low- and middle-income countries is projected to slow to 4.3 per cent in 2025, partly due to global trade tensions.
Despite the risks, Nigeria returned to the international debt market in 2024, raising $2.2bn in Eurobonds at yields of 9.625 per cent and 10.375 per cent to help finance its budget deficit, following a year-long absence.
The World Bank said Eurobond issuances by International Development Association (IDA)-eligible countries such as Nigeria and Kenya signal renewed investor interest, but at significantly higher borrowing costs.
Private creditor commitments to low- and middle-income countries averaged 5.89 per cent in 2024, the highest levels recorded since before the 2008 global financial crisis.
Sub-Saharan African bond inflows rose sharply by 55.6 per cent to $27.7bn in 2024, according to the report, though it warned that principal repayments are expected to surge by 87.5 per cent in low-income countries by 2026.
Interestingly, Nigeria was listed among African countries that recorded some of the continent’s largest current account surpluses in 2024, alongside Djibouti and Angola, even as many peer economies posted deficits.
“As of 2024, 23 low- and middle-income countries recorded current account surpluses, with the largest seen in Africa Djibouti, Nigeria and Angola,” the report stated.
Nevertheless, Nigeria was grouped with high-risk debt peers such as Kenya, Mozambique and Zambia, reflecting lingering concerns about sustainability.
The World Bank also disclosed that Nigeria ranked among the top recipients of multilateral financing in 2024, as net credit flows from multilateral lenders reached record levels.
Net inflows from the World Bank’s lending arms, the International Bank for Reconstruction and Development and the International Development Association rose 30.4 per cent to $36bn, the highest level on record.
Nigeria, alongside Bangladesh, Kenya, the Philippines and Ukraine, emerged as one of the largest beneficiaries of the increased funding, even as overall multilateral debt flows slowed from the extraordinary levels recorded during the COVID-19 pandemic.
The report concludes that without deeper structural reforms, including export diversification, stronger fiscal discipline and institutional strengthening, rising debt could continue to undermine growth prospects across Nigeria and the wider Sub-Saharan African region.
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