The Federal Government of Nigeria is set to receive a substantial loan package totaling around $2.2 billion from the World Bank, along with additional budget support from the African Development Bank (AfDB).
Minister of Finance, Wale Edun, announced these developments during a press briefing after Nigeria participated in the World Bank/IMF Spring Meetings in Washington DC, United States.
Edun highlighted various sources of international funding to boost the Nigerian economy, including diaspora remittances, foreign portfolio investments, and support from international development partners such as the World Bank and AfDB. The total loan package from the World Bank, amounting to $2.25 billion, offers favorable terms with a lengthy moratorium period of 10 to 20 years and an interest rate of just 1%.
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He stated, “We have qualified for the processing just this week to the Board of Directors of the World bank of a total package of $2.25 billion of what you can call ‘the closest you can get to a free lunch’- virtually a grant. It’s for about a 10- 20 year moratorium and about 1% interest.”
Additionally, low-interest budgetary support from the African Development Bank is expected to further boost Nigeria’s economic recovery efforts.
“In addition, there is a similar budgetary support – low-interest funding from the African Development Bank (AfDB) and, clearly, there are also ongoing discussions with foreign direct investors across many sectors,” he said.
Edun also revealed plans to issue dollar-denominated securities targeted at Nigerians in the diaspora and those with foreign-denominated savings within Nigeria, aiming to attract foreign exchange inflows into the country.
According to the Minister, the issuing of government securities at an interest rate closer to the CBN’s monetary policy rate (MPR) is an indication of the collaboration between both sides of the economy in tackling inflation in the country and attracting forex inflows.
However, concerns have been raised regarding Nigeria’s escalating public debt, with projections indicating that the nation’s total debt profile could reach at least N107.38 trillion soon. This anticipated increase in debt follows recent approvals for fresh borrowings by the Federal Government and new securitization of the Central Bank of Nigeria’s Ways and Means advances.
In December 2023, the Senate approved President Bola Tinubu’s request to borrow $7.8 billion and €100 million as part of the Federal Government’s 2022-2024 borrowing plan. Nigeria’s total debt stood at N87.91 trillion as of September 2023, according to data from the Debt Management Office.
The mounting debt burden has raised concerns about its sustainability, particularly as Nigeria’s revenue is increasingly diverted towards debt servicing, hindering economic and infrastructural development. However, it occurs amidst a global backdrop of mounting debt burdens on developing countries. The United Nations Trade and Development Report Update (April 2024) highlights the challenges faced by governments in developing countries as they struggle to manage increasing debt levels.
“Developing countries’ governments are struggling under increasing debt payment obligations. In 2022, they paid $50 billion more to external creditors than they received in new loans,” the report.
“By 2023, nine low-income countries had fallen into debt distress, with an additional 25 on the brink, underscoring a worsening global debt crisis.”
These challenges underscore the urgency for Nigeria to carefully manage its debt levels to avoid jeopardizing its long-term economic stability and growth prospects.