Nigeria now ranks among the top 10 IDA debtors according to the World Bank due to rising debt.
Nigeria was ranked fifth on the list with a $11.7 billion IDA debt stock as of June 30, 2021, according to the World Bank’s fiscal year 2021 audited financial statements (also known as the IDA financial statement).
Nigeria has advanced to the fourth spot on the list, with $13 billion in IDA debt stock as of June 30, 2022, according to the World Bank’s recently issued Fiscal Year 2022 audited financial records for IDA.
This demonstrates that during a fiscal year, Nigeria accrued almost $1.3 billion in IDA debt, surpassing Vietnam to take the fourth-highest debtor position.
The $486 million loan from the International Bank for Reconstruction and Development of the World Bank is not comparable to this debt.
The top five nations on the list, with the exception of Nigeria, all modestly decreased their IDA debt stock.
Bangladesh’s debt stock decreased from $18.1 billion to $18 billion, while India, which is still at the top of the list, saw a reduction from $22 billion to $19.7 billion.
Pakistan, which dropped from $16.4 billion to $15.8 billion in debt, is next. Vietnam, which had been in fourth place, dropped to fifth from $14.1 billion to $12.9 billion.
Since the top three IDA borrowers are all from Asia (India, Bangladesh, and Pakistan), Nigeria has the biggest IDA debt of any country in Africa. Nigeria’s debt, though it may be viewed as sustainable for the time being, is risky and expensive, according to current information from the World Bank.
According to the bank, “Central Bank of Nigeria’s huge and expanding financing ensures that Nigeria’s debt remains sustainable, despite being vulnerable and expensive.”
The international financial organization with headquarters in Washington did add that in the event of macro-fiscal shocks, the country’s debt also ran the risk of becoming unsustainable.
The expense of the nation’s debt servicing also caused the bank concern, claiming that it interfered with public investments and essential spending for service delivery.
Additionally, economists have expressed alarm about the federal government’s expanding debt load.
Mr. Taiwo Oyedele, a fiscal policy partner and the Africa tax leader at PwC, voiced his agreement with the World Bank regarding the high cost of debt payment.
He declared, “I support the World Bank. The debt payment cost to revenue ratio is already higher than 70%, despite the fact that the debt to GDP ratio is not excessive. You’ll realize it’s expensive at that point.
Kingsley Moghalu, a former presidential contender and deputy governor of the Central Bank of Nigeria, also criticized the government’s increased borrowing propensity and urged officials to reevaluate alternative sources of revenue for the nation.
Moghalu asserted that it was also unreasonable to borrow money for infrastructure improvement because the government might increase the opportunities for public-private partnerships with regard to this kind of improvement.
High debt levels would frequently result in high debt services and have an impact on infrastructure projects, according to a document by Patience Oniha, the director general of the debt management office, which our reporter recently acquired.
The DMO DG claims that “high debt levels contribute to hefty debt payment, which decreases resources available for investment in infrastructure and important sectors.”