New financial data from the International Development Association (IDA), the World Bank’s concessional lending arm, shows that Nigeria’s debt to the institution climbed to $18.7 billion as of December 31, 2025. This represents an increase of $1.9 billion from $16.8 billion at the end of 2024—an 11.3% year-on-year rise—highlighting Abuja’s increasing reliance on concessional funding to bridge fiscal gaps.
With this latest rise, Nigeria has become the third-largest borrower in the IDA’s portfolio, trailing only Bangladesh ($23.0 billion) and Pakistan ($19.4 billion). Collectively, the top ten borrowing countries accounted for 60% of the IDA’s total exposure at the end of 2025, underscoring the concentration of concessional loans among a handful of developing nations.
Why Nigeria is Turning to Concessional Financing
Analysts say the uptick in IDA borrowing reflects a combination of continued project disbursements and expanded commitments in priority sectors such as healthcare, education, and infrastructure. Concessional loans are attractive because they typically carry lower interest rates and longer maturities than commercial debt, making them one of the cheapest sources of external financing available to developing countries.
The IDA noted that it closely monitors country exposures to assess risk, taking into account both repayment schedules and projected new loans and guarantees. “Monitoring these exposures relative to the SBL requires consideration of the repayment profiles of existing loans, as well as disbursement profiles and projected new loans and guarantees,” the institution stated.
Overall, the IDA’s portfolio expanded significantly in 2025, with net loans outstanding rising to $226.4 billion from $205.8 billion the previous year, reflecting a broader scaling up of concessional resources under its hybrid financing model.
Multilateral Debt Dominates Nigeria’s External Obligations
Nigeria’s rising IDA borrowing has made the World Bank Group a dominant player in its external debt profile. According to the Debt Management Office, the country’s external debt stood at $46.98 billion as of June 30, 2025. Of that amount, $19.39 billion (41.3%) is owed to the World Bank, comprising $18.04 billion from the IDA and $1.35 billion from the International Bank for Reconstruction and Development (IBRD).
This exposure positions the World Bank as the largest single external creditor to Nigeria, surpassing other multilateral lenders and exceeding the IDA exposure of other major African clients such as Ethiopia and Tanzania.
Experts Caution on Debt Sustainability
Economists stress that borrowing in itself is not inherently problematic. Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise, noted that deficit financing is common globally and can support growth if loans are used productively. However, he cautioned that sustainability ultimately hinges on Nigeria’s revenue strength.
“Without sufficient cash flow to meet repayment obligations, countries risk a vicious cycle of borrowing to service existing loans,” Yusuf said. He also highlighted exchange-rate risks, noting that foreign-currency debt can strain reserves and put pressure on the naira if not carefully managed.
Analysts warn that while IDA loans are concessional and more manageable than commercial borrowing, the steady accumulation of external obligations intensifies scrutiny over Nigeria’s long-term debt trajectory. Proper planning, disciplined borrowing, and productive use of funds will be essential to ensure that concessional loans do not inadvertently contribute to fiscal vulnerability.
Balancing Development Needs and Debt Risk
For policymakers, the rise in IDA exposure underscores a familiar dilemma. Concessional loans are among the cheapest tools available to fund Nigeria’s development gaps, yet their accumulation adds to external debt risk. Analysts say that future sustainability will depend on strong revenue mobilization, careful prioritization of spending, and prudent management of borrowing.
As Nigeria continues to rely on concessional financing to bridge fiscal gaps and fund critical development projects, striking the right balance between financing growth and maintaining debt sustainability will remain a key challenge for the government and development partners alike.