UNCTAD: Lower borrowing costs could save Nigeria, others $500 billion annually

Nigeria and other developing countries could save as much as $500 billion annually if they were able to borrow at the same average interest rates enjoyed by advanced economies.

This is according to a new report by the United Nations Conference on Trade and Development (UNCTAD) titled “Financing Development: External Flows of Financial Capital to Developing Countries and Their Cost”.

Nigeria is classified as a developing country under the United Nations’ official classification system, in line with the UN M49 Standard for geographic regions and development groupings.

The report highlights the heavy debt-servicing burden facing many developing nations and the significant development gains that could be unlocked through cheaper access to finance.

According to UNCTAD, high borrowing costs continue to divert resources away from critical sectors such as education, healthcare, infrastructure, and food security.

What the report is saying

UNCTAD noted that a large number of developing countries continue to face significantly higher borrowing costs than their developed counterparts.

• The weighted average effective interest rate paid by developed countries stood at 2.2% in 2024.
• By contrast, about three-quarters of developing countries, representing 94 nations, paid an average effective interest rate of 5.5%.
• If these countries were able to borrow at the same 2.2% average rate as developed economies, they could collectively save approximately $500 billion annually in interest payments.

The remaining quarter of developing countries already enjoy borrowing costs at or below the 2.2% benchmark.

The report cited a recent debt swap arrangement in Côte d’Ivoire, supported by a World Bank policy-based guarantee, as an example of how lower borrowing costs can free up resources for development priorities.

More insights

UNCTAD said the potential savings from lower debt-servicing costs could dramatically expand investments in social and economic infrastructure across developing economies.

• A debt swap in Côte d’Ivoire is expected to generate net present value savings of €60 million, with €40 million earmarked for the construction of 30 schools serving about 30,000 students.
• Based on similar construction costs, UNCTAD estimates that $500 billion in annual interest savings could finance approximately 375,000 new schools each year, serving around 375 million students.
• The report also highlighted that lower borrowing costs could support investments in healthcare, transportation, renewable energy, and nutrition programmes.

According to UNCTAD’s estimates, the annual savings could finance more than 1.63 billion children through minimum dietary diversity feeding schemes or fund over 1.29 million primary healthcare centres.

• The report noted that the funds could finance about 65,590 kilometres of dual-lane rural highways annually.
• They could support the construction of approximately 23,737 kilometres of high-speed railway tracks.
• The savings would be sufficient to install about 923,124 megawatts of solar electricity generation capacity each year.

The report argues that reducing financing costs remains one of the most effective ways to accelerate development outcomes in emerging and developing economies.

What you should know

Recently, UNCTAD raised concerns that least developed countries (LDCs) are losing about 10% of their exports to G20 economies due to their inability to comply with increasingly complex non-tariff measures (NTMs).

UNCTAD’s warning points to a shift in global trade dynamics where regulatory complexity, rather than tariffs, is increasingly determining who trades, what is traded, and at what cost.

In April, the Debt Management Office (DMO) increased borrowing costs at its latest Federal Government (FGN) bond auction.