By John Ikani
Nigeria, under President Bola Tinubu’s leadership, has secured substantial loans totalling $2.7 billion from the World Bank, raising concerns about the escalating costs associated with servicing the country’s external debt.
The allocated funds are earmarked for critical sectors, with $750 million directed towards enhancing Nigeria’s power sector.
According to the World Bank, the loan will play a supplementary financing role for the power sector’s recovery performance-based operation, approved on June 9, 2023.
Another significant loan, amounting to $500 million, was sanctioned on June 27 to propel women’s empowerment.
This marked the second loan approval during Tinubu’s administration and supported the scaling up of financing for the Nigeria for Women Programme.
In a bid to fortify educational opportunities and empowerment for adolescent girls, the World Bank granted a $700 million loan in September 2023.
The funding backs the ongoing ‘Adolescent Girls Initiative for Learning and Empowerment’ (AGILE) project, striving to enhance secondary education accessibility for girls in specific target states within Nigeria.
The final tranche, a $750 million loan for renewable energy, was given the green light on December 14.
The Distributed Access through Renewable Energy Scale-up (DARES) project aims to provide over 17.5 million Nigerians with improved electricity access through distributed renewable energy solutions, addressing the electricity access deficit.
According to the World Bank’s International Debt Report for 2023, Nigeria outpaced other nations in securing new loans in 2022, with approximately $2.9 billion released.
Tanzania followed closely with $2.7 billion in the same period.
As of September 30, 2023, Nigeria’s total debt owed to the World Bank stands at $14.58 billion, as per data from the Debt Management Office (DMO).
Rising concerns surround the country’s escalating debt costs, evidenced by a staggering 277.64% increase in external debt servicing during the third quarter of 2023.
Despite the DMO’s statement indicating a decrease in external debt due to Eurobond redemption and principal repayment on a $3.4 billion loan from the International Monetary Fund (IMF) in 2020, there is a notable absence of the IMF debt service record in the external debt servicing report for Q3 2023.
Highlighting the global impact of soaring debt service costs, the World Bank’s Chief Economist and Senior Vice President, Indermit Gill, urged prompt and coordinated action.
Gill stressed the need for increased transparency, enhanced debt sustainability tools, and swifter restructuring arrangements to avert the risk of a lost decade for developing countries.
“Record debt levels and high interest rates have set many countries on a path to crisis. Every quarter that interest rates stay high results in more developing countries becoming distressed and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.
“The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade,’’ said Gill.