High debts could hinder economic growth in Nigeria
ABUJA – The West Africa economic powerhouse’s indebtedness to the Washington DC, United States-based lender has also risen from $ 6.29billion as of December 2015 to $13.9 billion as of December 2022, according to data from the external debt stock reports by the Debt Management Office.
The International Development Association and the International Bank for Reconstruction and Development, which make up the World Bank, have over the years advanced loans to Nigeria.
The IBRD lends to governments of middle-income and creditworthy low-income countries, while the IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.
The data showed that in 2016, Nigeria had a debt of $6.2 billion from IDA and $3.6 million from IBRD, but by 2022, the borrowing through IDA was $13.45bn while the one from IBRD was $487 million.
A further breakdown over the years showed that Nigeria’s total borrowing from the World Bank was $6.7 billion in 2016, $8 billion in 2017, $8.67billion n in 2018, $10.1bn in 2019, $11.5 billion, and $12.38billion in 2021.
The loans approved by the World Bank to Nigeria are usually tied to different projects across different parts of the country.
For instance, in 2020, the Nigeria Rural Access and Agricultural Marketing Project, which seeks to upgrade rural roads, and improve connectivity and access to local markets and agribusiness services in 13 states, was approved to be co-financed through an IDA credit of $280 million, $230 million from the French Development Agency, and $65 million from the Federal Government of Nigeria.
The Nigeria Digital Identification for Development Project, which will support the National Identity Management Commission to increase the number of persons who have a national identification number to about 150 million in the next three years, was also approved to be co-financed through an IDA credit of $115 million, $100 million from the French Development Agency, and $215 million from the European Investment Bank.
In 2021, the World Bank approved a $700m credit from the IDA for the Nigeria Agro-Climatic Resilience in Semi-Arid Landscapes Project.
The bank also approved $500 million to help boost access to electricity in Nigeria and improve the performance of the electricity distribution companies in the country.
The World Bank Fiscal Year 2021 audited financial statements, known as the IDA financial statement, showed that Nigeria was rated fifth on the list with $11.7 billion IDA debt stock as of June 30, 2021.
However, the newly released World Bank Fiscal Year 2022 audited financial statements for IDA showed that Nigeria has moved to the fourth position on the list, with $13 billion IDA debt stock as of June 30, 2022.
This shows that Nigeria accumulated about $1.3 billion in IDA debt within a fiscal year, with the country taking over the fourth top debtor position from Vietnam.
This debt differs from the outstanding loan from the World Bank’s International Bank for Reconstruction and Development.
The top five countries on the list slightly reduced their IDA debt stock, except for Nigeria.
The World Bank disclosed recently that Nigeria’s debt, which may be considered sustainable for now, is vulnerable and costly.
The bank said, “Nigeria’s debt remains sustainable, albeit vulnerable and costly, especially due to large and growing financing from the Central Bank of Nigeria.”
Nigerian economists have warned that the incoming government may face a debt repayment crisis if nothing is done to tackle the spate of borrowing amid low revenue.
A professor of Economics at the University of Ibadan, Prof Adeola Adenikinju, has warned that Nigeria’s debt service to revenue ratio could exceed 100% if urgent measures are not taken to expand the country’s revenue base.