New data show rising reliance on concessional financing as fiscal pressures mount and external debt obligations expand…
Nigeria’s debt to the World Bank’s concessional lending arm, the International Development Association, rose sharply by 1.9 billion dollars within one year, reaching 18.7 billion dollars as of December 31, 2025, according to newly released financial data from the institution.
Figures contained in the IDA Management’s Discussion and Analysis for the period show Nigeria’s exposure increased from 16.8 billion dollars at the end of 2024, representing an 11.3 percent year-on-year rise. The increase highlights the country’s growing dependence on concessional multilateral financing as the Federal Government grapples with tightening fiscal space and global economic volatility.
With the new figures, Nigeria ranks as the third-largest borrower in the IDA portfolio, behind Bangladesh with 23.0 billion dollars and Pakistan with 19.4 billion dollars, among the ten countries with the highest exposure to the institution.
According to the report, the top ten borrowers together accounted for about 60 percent of IDA’s total exposure as of December 31, 2025, slightly lower than the 61 percent recorded a year earlier. The 1.9 billion dollar increase in Nigeria’s debt largely reflects ongoing disbursements tied to projects under the country’s partnership frameworks, as well as expanded commitments across key sectors including health, education, and infrastructure.
Although IDA loans are offered on highly concessional terms, featuring long repayment periods and grace windows, the expanding debt stock continues to add to Nigeria’s external debt burden.
The institution stressed the need for close monitoring of exposure levels in relation to repayment capacity and future borrowing plans, noting that careful assessment must consider repayment schedules of existing loans alongside projected disbursements and new financing commitments.
The increase in Nigeria’s exposure comes amid broader growth in IDA’s global portfolio. Net loans outstanding rose to 226.4 billion dollars as of December 31, 2025, up from 205.8 billion dollars a year earlier, reflecting expanded concessional financing under the bank’s hybrid funding structure, which combines member contributions with market-based borrowing.
IDA says its core mandate is to provide loans, grants, and guarantees to the world’s poorest and most vulnerable countries to support development and poverty reduction.
Nigeria’s exposure now surpasses that of other major African borrowers such as Ethiopia and Tanzania, reinforcing its prominent position within the World Bank’s concessional lending framework.
Alongside the IDA, the World Bank Group also operates the International Bank for Reconstruction and Development, which provides financing to middle-income and creditworthy lower-income countries through funds raised on global capital markets using its AAA credit rating. The institution offers sovereign loans, guarantees, and advisory services aimed at promoting sustainable development and reducing poverty.
Despite the favourable terms associated with concessional financing, analysts warn that the steady accumulation of such loans contributes to Nigeria’s overall public debt burden and raises questions about long-term sustainability.
Data from the Debt Management Office show that Nigeria’s total external debt stood at 46.98 billion dollars as of June 30, 2025. Of this figure, the World Bank Group accounted for 19.39 billion dollars, comprising 18.04 billion dollars owed to the International Development Association and 1.35 billion dollars to the International Bank for Reconstruction and Development. This places the World Bank’s share of Nigeria’s external debt at about 41.3 percent, underlining its central role in financing the country’s development programmes.
Economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said rising World Bank lending to Nigeria should be viewed within the framework of the country’s Medium-Term Expenditure Framework and annual budgets, both of which accommodate domestic and foreign borrowing.
He explained that deficit financing is a common global practice and can support critical investments when revenues are insufficient, but cautioned that borrowing must be guided by sound economic logic and clear development priorities. According to him, the key concern remains debt sustainability, which depends largely on the government’s revenue capacity to meet repayment obligations.
Yusuf warned that weak cash flow could push the country into a cycle of borrowing to service existing debt, increasing fiscal vulnerability. He added that loan-funded projects must strengthen the economy’s ability to repay, stressing that Nigeria should remain cautious about foreign borrowing due to exchange-rate risks, noting that domestic debt is generally easier to manage.
He further cautioned that excessive reliance on external loans could exert pressure on foreign reserves and weaken the national currency, emphasising that a disciplined and strategic approach to borrowing will be essential to prevent long-term fiscal strain.
