Market News

By Damilola Aina

The Director of the Group of 24, Dr Iyabo Masha, says developing economies, including Nigeria, continue to pay significantly higher borrowing costs than advanced countries due to weak revenue structures, high debt burdens, and limited access to concessional financing.

Masha disclosed this on Friday during a question-and-answer session on the sidelines of the 2026 Spring Meetings of the World Bank/International Monetary Fund in Washington DC, United States

She explained why loans from global financial institutions and private markets often come at a premium for poorer nations

“Indeed, the research has shown that developing countries pay interest rates that are sometimes even three or four times more than those of advanced economies. In the private market, we have to make a distinction between what is happening in the private market and the cost they pay to maybe the World Bank, the IMF and bilaterals.

 Now, the point is that most of these, first of all, have the high cost of borrowing, which has become such a big issue.

The G20 presidency under South Africa commissioned a study on the high cost of borrowing, in which they also came up with different recommendations. Now, on the part of the domestic economy, the challenges some of them face are the income generated,” she said.

Masha attributed the disparity largely to how lenders assess risk, noting that a country’s revenue-generating capacity plays a central role in determining interest rates.

“This is because a creditor, when they decide to fix the interest rate, is looking basically at the income of the country. How much is this country pulling in from taxes? Because that is what you are going to use to service your debt. And then they come up with what they think will be a good interest rate for them. So, this is the major area. One, the credit agencies, the way they frame their methodology is just based on income. But if they take into consideration, and that’s one of the areas in which we are engaging them on, if they take into consideration the long-term potential of an economy or the endowments of an economy, then they may be able to rate the economy in such a way that the interest rates will be lower.

“This high cost of borrowing has become such a big issue,” she said, adding that even the G20 had commissioned studies to address the problem. “On the part of the domestic economy, the challenge is the income generated. A creditor, when they decide to fix the interest rate, is looking basically at the income of the country, how much the country is pulling in from taxes, because that is what will be used to service the debt.”

She explained that many developing countries, including Nigeria, struggle with low tax revenues and large informal sectors, which weaken their financial profile in the eyes of lenders.

“Many countries don’t have strong tax frameworks. A large part of the economy is informal and not taxed. So, when lenders base their judgment only on the income coming in, it leads to higher interest rates,” she added.

Masha also stated Nigeria may not qualify for any meaningful debt relief in the near term, as its current borrowing structure and continued ability to service obligations place it outside the category of distressed economies eligible for such interventions.

She said the global rules guiding debt relief programmes make it difficult for a single country like Nigeria to secure standalone forgiveness, adding that the country is well-resourced and still has the capacity to repay its loans.

“First, for a global, generalised debt relief, it cannot apply to one country. There are standard laws. There is what we call the ‘comparability of treatment’. That’s one of the reasons why debt relief is usually generalised, even the one that Nigeria got in 2002, 2003. That’s a debt relief programme that was applicable to all the countries that were in that category. It wasn’t a special initiative for Nigeria, though many people assumed that was the case,” she said.

She clarified that Nigeria’s landmark debt relief secured under former President Olusegun Obasanjo was not uniquely negotiated for the country but was part of a wider international programme targeting a class of heavily indebted nations.

“That debt relief was at that time about two decades ago. Most of the debt was owed to the international institutions and maybe bilateral governments, the Paris Club. Now, the landscape of debt has changed considerably. So, that makes it more difficult to have generalised debt relief,” she added.

Masha pointed out that the structure of global debt has significantly evolved since the early 2000s, making current relief efforts more complex and less likely.

According to her, Nigeria’s debt profile, like that of many developing countries, has shifted away from traditional bilateral and multilateral lenders toward private creditors, complicating any coordinated relief process.

“And the reason is that these countries were borrowing more from private creditors. Back in those days, the private creditor loans were very minimal. Then the second issue is that when they go to the market to borrow, they do have different types of agreements with these private creditors that may make it difficult to resolve. So those are the main factors why having generalised debt relief is a bit difficult this time around.

“Most of the debt at that time was owed to international institutions and bilateral governments, like the Paris Club. Now, the landscape of debt has changed considerably,” she said.

“And that makes it more difficult to have generalised debt relief. The reason is that countries are now borrowing more from private creditors. Back in those days, private creditor loans were very minimal.”

She further explained that loans from private markets come with varied contractual agreements, which are often difficult to renegotiate collectively.

“When they go to the market to borrow, they have different types of agreements with these private creditors that may be difficult to have a resolution on. So those are the main factors why having a generalised debt relief is a bit difficult this time around,” she added.

The G-24 director noted that the international community has introduced mechanisms such as the G20 Common Framework to help struggling economies but said such initiatives offer only partial relief.

“What the international community has been able to do is to bring out a framework they call the Common Framework. But it applies only to bilateral debts. It doesn’t cover multilateral debts like those owed to the World Bank or IMF, and it doesn’t cover private creditors,” she explained.

She cited countries like Ghana and Ethiopia as examples currently undergoing restructuring under the framework.

“By going through this Common Framework, it’s essentially a restructuring. So, if a country was paying $100, it may now pay $80. It doesn’t cancel the debt, but at least it gives some relief,” she said.

Masha, however, stressed that the G-24 is advocating broader participation from all categories of creditors to make such relief more impactful.

On Nigeria’s eligibility, Masha said a key requirement for accessing debt relief is an official declaration of inability to meet debt obligations, something Nigeria has not done.

“A country has to declare that it cannot pay its debt before it can even get involved in relief. If a country does not make that declaration, it continues to pay its debt,” she said.

“Nigeria is meeting its obligations. Nigeria is paying its debt. So that means it’s able to afford it.”

She added that countries are often reluctant to make such declarations due to the potential negative impact on investor confidence and broader economic stability.

“Even when they get to a point where paying their debt becomes difficult, they don’t want to come out and say that they have difficulties because that would create more negative impact on other areas of their economy,” she said.

Despite rising debt concerns, she noted that Nigeria remains an attractive destination for investors in international capital markets.

“Nigeria is still attractive to the external market. They are still able to borrow. I think there was a report recently of a huge amount of borrowing. So, it is still a very attractive market,” she added.

Nigeria’s total public debt has surged significantly in recent years, driven by fiscal deficits, exchange rate pressures, and increased reliance on both domestic and external borrowing.

Data from the Debt Management Office shows that the country’s total public debt increased to N159.28tn as of 31 December 2025.

Total public debt rose from N153.29tn recorded at the end of September 2025 to N159.28tn in December 2025, according to the latest data released by the DMO.

The increase indicates a quarter-on-quarter increase of N5.98tn or 3.9 per cent.

The debt stock comprises domestic borrowings, multilateral loans from institutions such as the World Bank and the International Monetary Fund, bilateral loans, and a growing share of commercial debt, including Eurobonds.

While Nigeria’s debt-to-GDP ratio remains moderate, its debt servicing-to-revenue ratio is high, putting pressure on government finances.