Nigeria Emerges as Third-Largest World Bank Borrower Amid Rising IDA Debt
Nigeria has ascended to become the third-largest borrower from the World Bank's concessional lending arm, the International Development Association (IDA), with its debt soaring to $18.7 billion as of December 31, 2025. This significant increase highlights the country's deepening reliance on multilateral financing during a period of fiscal strain and global economic uncertainty.
Sharp Increase in IDA Debt and Its Implications
Fresh financial data released by the World Bank and confirmed by Nigeria's Debt Management Office (DMO) reveals that Nigeria's IDA exposure rose by $1.9 billion within one year, up from $16.8 billion at the end of 2024. This represents an 11.3% year-on-year increase, underscoring the government's growing dependence on concessional loans to fund development projects.
The latest figures position Nigeria behind Bangladesh, which tops the list with $23.0 billion, and Pakistan at $19.4 billion. Collectively, the ten largest borrowers account for 60% of IDA's total exposure as of December 2025, a slight decrease from 61% the previous year.
World Bank's Growing Share in Nigeria's External Debt Profile
Nigeria's exposure to the World Bank now constitutes a substantial portion of its external debt. According to the DMO, Nigeria's total external debt stood at $46.98 billion as of June 30, 2025. Of this amount, the World Bank Group accounted for $19.39 billion, comprising $18.04 billion from IDA and $1.35 billion from the International Bank for Reconstruction and Development (IBRD).
This means the World Bank holds approximately 41.3% of Nigeria's external debt, reinforcing its critical role in financing the country's development initiatives. While IDA loans are concessional with long maturities and grace periods, IBRD loans target middle-income and creditworthy lower-income countries, funded through global capital markets.
Drivers Behind Nigeria's Rising Debt
The increase in IDA debt reflects continued project disbursements under Nigeria's development frameworks with the World Bank, along with expanded commitments across vital sectors such as health, education, and infrastructure. IDA financing is designed for low-income and vulnerable nations, offering favorable terms compared to commercial borrowing.
In its report, IDA emphasized the importance of monitoring exposures in alignment with repayment and disbursement profiles. It noted that assessing loan sustainability requires careful consideration of existing repayment schedules, ongoing disbursements, and projected new loans and guarantees.
Expert Warnings on Fiscal Sustainability and Risks
Economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, has cautioned that rising World Bank commitments must be viewed within Nigeria's Medium-Term Expenditure Framework and annual budgets, which already incorporate both domestic and foreign borrowing.
He explained that while deficit financing is common globally for funding critical investments, sustainability remains paramount. Borrowing should be guided by sound economic reasoning and aligned with projects that enhance the economy's repayment capacity. Without sufficient revenue to service obligations, Nigeria risks falling into a cycle of borrowing to repay existing debts, deepening fiscal vulnerability.
Yusuf also highlighted the risks associated with foreign-currency loans, noting that exchange-rate volatility can significantly inflate repayment costs, putting pressure on foreign reserves and weakening the naira. In contrast, domestic debt is often more manageable.
Broader Context and State-Level Debt Burdens
The broader context reveals that IDA's total net loans outstanding rose to $226.4 billion as of December 31, 2025, up from $205.8 billion a year earlier, reflecting expanded concessional support under its hybrid financing model.
Additionally, Nigeria's 36 states paid a combined N455.38 billion in foreign debt service deductions in 2025, according to Federation Accounts Allocation Committee figures released by the National Bureau of Statistics. This marks a sharp rise from N362.08 billion in 2024, representing a 25.77% year-on-year increase, indicating that a larger share of states' allocations is being automatically deducted to service external loans.
As Nigeria's IDA exposure climbs to $18.7 billion, the focus shifts to fiscal discipline and revenue growth. Concessional loans may offer temporary relief, but without stronger revenue performance and prudent debt management, the country could face mounting long-term fiscal pressures.
