BREAKING: World Bank Warns Nigeria to Diversify Exports, Reform Finances Amid Rising Debt

• The World Bank has cautioned Nigeria and other Sub-Saharan African nations to implement export diversification and fiscal reforms as public debt and servicing costs continue to rise, despite sluggish economic growth.

The World Bank has raised alarms over Nigeria’s rising debt levels, urging the country to pursue export diversification and fiscal reforms to prevent worsening economic strain.

The warning was contained in the International Debt Report 2025, which highlights Sub-Saharan Africa as an outlier where debt levels and servicing costs increased through 2024 despite weak GDP growth, driven largely by countercyclical official financing rather than productive investment.

According to the report, Nigeria’s public debt stock, which combines external and domestic obligations, rose 2.01 per cent quarter-on-quarter to N152.39tn (US$99.65bn) in Q2 2025, up from N149.38tn (US$97.23bn) in Q1.

Financial analysts have expressed concern over the nation’s growing debt profile, especially as the government plans to borrow N17.89tn in 2026, following approvals for N1.15tn domestic loans in late 2025.

The report notes that Sub-Saharan Africa diverged from other regions post-COVID, with external debt continuing to rise 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 analysis states.

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Negative correlations between GDP growth and debt accumulation became pronounced across the region during 2020–2024, affecting 64 per cent of low- and middle-income countries (LMICs).

High debt levels, according to the World Bank, amplify vulnerabilities by crowding out critical sectors such as health, education, and infrastructure, and can exacerbate nutrition insecurity and institutional weaknesses.

“High external debt burdens are also associated with broader systemic fragility, because countries with weaker institutions… face elevated vulnerability,” the report warns.

The World Bank report also highlighted Nigeria’s return to the international bond market in 2024, raising US$2.2bn in Eurobonds at yields of 9.625 and 10.375 per cent to fund budget deficits. While this reflects renewed investor confidence, the rates are notably higher than pre-2008 levels, emphasizing the cost of borrowing.

Despite the challenges, Nigeria posted one of Africa’s largest current account surpluses in 2024, alongside Djibouti and Angola, contrasting with many LMIC peers running deficits.

The country remains one of the top recipients of World Bank inflows, alongside Bangladesh, Kenya, and Pakistan, benefiting from record multilateral credit totaling US$36bn in 2024, up 30.4 per cent from the previous year.

The report underscores that Nigeria and other Sub-Saharan African nations must take urgent action to diversify exports, implement prudent fiscal management, and ensure debt sustainability to avoid deepening economic vulnerabilities in the years ahead.