Nigeria has solidified its position as the third-largest debtor to the World Bank’s International Development Association (IDA), with its exposure rising to $17.1 billion as of September 30, 2024.

This marks an increase of $600 million from the $16.5 billion recorded three months earlier in June 2024.

The World Bank’s latest financial statements for the fiscal year up to September 2024 reveal a significant year-on-year debt growth of 14.4%, up from $14.3 billion in June 2023. The fiscal year, which spanned July 2023 to June 2024, saw Nigeria receive an additional $2.2 billion in loans, further cementing its reliance on concessional financing.

For the first time, Nigeria ascended to the top three IDA borrowers in June 2024, surpassing its previous rank of fourth in 2023. Under President Bola Tinubu’s administration, the country has received $2.8 billion in loans from the IDA, maintaining its status as the third-largest debtor behind Bangladesh and Pakistan.

Bangladesh holds the top spot with an exposure of $21 billion, followed by Pakistan at $18.5 billion. India, which was displaced by Nigeria, stands in fourth place with a debt of $15.9 billion, while Ethiopia ranks fifth with $13.1 billion. Other significant borrowers include Kenya ($12.4 billion), Tanzania ($12.2 billion), and Vietnam ($12.2 billion). At the lower end, Ghana and Uganda owe $7 billion and $5 billion, respectively.

Together, these ten countries account for 63% of the IDA’s total exposure, reflecting their heavy dependence on concessional financing.

Nigeria’s rising debt to the IDA underscores its continued reliance on external borrowing to manage its fiscal challenges and implement development programs. The concessional loans, characterized by low interest rates and extended repayment terms, are critical to the country’s funding strategy.

However, the growing debt burden comes at a cost. The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, a 39.77% increase from the $2.56 billion spent during the same period in 2023. This surge in debt servicing payments highlights the mounting pressure on Nigeria’s fiscal balance amid persistent economic challenges.

IDA’s Single Borrower Limit

The IDA has set its Single Borrower Limit (SBL) at $47.5 billion for FY2025, representing 25% of its $190.3 billion equity as of June 30, 2024. While Nigeria’s debt remains significant, it is still within this threshold, which the World Bank considers non-restrictive for now.

The World Bank’s financial statement emphasized the importance of monitoring repayment profiles, disbursement trends, and projected new loans to maintain a balanced exposure for the IDA.

Debt Growth Without Development Gains

This rising debt is stirring deep concerns among economists and policymakers, who question whether these loans are being effectively utilized to stimulate economic and developmental growth.

Critics argue that the funds, which are expected to be channeled toward critical infrastructure and poverty alleviation projects, have failed to yield measurable progress in key sectors.

With 56% of Nigerians living below the poverty line, the country faces immense development challenges that require significant investment. However, the reality on the ground tells a different story. Declining oil revenues, which traditionally account for a significant portion of the nation’s income, have left a gaping hole in public finances. Unemployment remains high, public infrastructure is in a deplorable state, and access to quality healthcare and education remains inadequate.

Analysts have repeatedly raised concerns that Nigeria is primarily borrowing for consumption rather than investment. They noted that funds are often used to cover recurrent expenditures such as public salaries, subsidies, and debt servicing, leaving little room for transformative projects that could spur long-term economic growth.

Fiscal Challenges Amid Tinubu’s Economic Reforms

Under President Tinubu, Nigeria has sought to balance the inherited debt obligations with necessary reforms to stabilize the economy. However, the pressure from rising debt servicing costs threatens to derail fiscal consolidation plans.

Economists have warned that without stringent measures to improve revenue generation, curb waste, and ensure effective utilization of borrowed funds, the benefits of these loans may not translate into meaningful development outcomes.

The fundamental issue, they argue, lies in the absence of a clear strategy to ensure that borrowed funds are deployed toward productive sectors. Instead of fueling economic growth, the loans are used to plug budget deficits and finance consumption-driven expenses.

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has described Nigeria’s budget as grossly inadequate to meet the country’s developmental needs.

Speaking during an interactive session organized by the House of Representatives on tax reform bills, Oyedele noted the severe fiscal challenges facing Nigeria and highlighted the country’s inability to match its population size with appropriate budgetary allocations.

Oyedele revealed that Nigeria’s total budgetary allocation for 2024, including supplementary provisions, stands at approximately $28 billion. This figure includes the federal government’s N35 trillion budget and the combined N15.9 trillion budgets of all 36 states. However, this $28 billion budget comes with a staggering deficit of about $8.4 billion—a gap largely attributed to revenue shortfalls.

“The $28 billion budget is barely equivalent to the budget of Kenya, which has a population of 54 million people,” Oyedele noted. “Meanwhile, South Africa, with just over 60 million people, has a budget of $130 billion. How is it that Nigeria, with over 200 million people, operates on a budget this small?”

The fiscal policy expert emphasized that Nigeria’s budget is inadequate even for single sectors like transportation, let alone the broader developmental needs of the nation. “That budget, if dedicated entirely to transportation—roads, rail, flying—it would still not be enough,” he said.

Deficit Woes and Revenue Shortfalls

Economists believe that the $8.4 billion deficit in the 2024 budget adds insult to the injury of Nigeria’s meager budget. Despite Nigeria being Africa’s largest economy, its fiscal capacity falls short of smaller African economies like Kenya, whose budget matches Nigeria’s, and South Africa, whose budget is more than four times larger. Additionally, Nigeria’s counterparts at the top four largest economies in Africa, have far higher budgets. For instance, Algeria has a $100 billion budget, and Egypt, has $120 billion, even with a much lower population.

“The narrative of our country cannot be changed by increasing the budget by 5 percent or 10 percent,” Oyedele said. “The base is just too small. It cannot fund our development.”

Revenue shortfalls remain a significant challenge, with underperforming oil revenues and limited non-oil revenue sources failing to meet budgetary targets.

Nigeria’s revenue is divided between the federal, state, and local governments. Oyedele outlined that the country has eight major revenue sources, five of which—personal income tax, property tax, stamp duties, VAT, and land revenues—are controlled by states. The federal government shares corporate income tax, customs duties, and petroleum and solid mineral revenues with the states.

This fragmented approach limits revenue mobilization at the national level and hampers efforts to address critical deficits, according to him. He noted also that inefficiencies in tax collection and the lack of enforcement mechanisms reduce Nigeria’s ability to optimize its existing revenue streams.

The Deficit’s Impact on Development

Against the backdrop of the $8.4 billion budget deficit, Nigeria’s ability to implement its 2025 budget effectively, like in the past, has been severely impacted. This means that critical sectors such as infrastructure, healthcare, and education will be severely underfunded. This situation results in borrowing to service existing debt, leaving little room for productive investments.

In 2024, Nigeria’s debt servicing costs have already exceeded projections, particularly for foreign debts, driven by naira depreciation and high borrowing costs. These financial constraints compound the pressure on public finances, leaving the government with limited capacity to address pressing developmental needs.

Oyedele’s remarks reflect the broader call for bold fiscal reforms to expand Nigeria’s revenue base and reduce its reliance on borrowing. Proposed measures include improving tax collection, enforcing compliance, and enabling states to generate more revenue through decentralized fiscal policies.

Oyedele noted that Nigeria’s current fiscal framework is insufficient to address the challenges of its growing population and economic demands.

“The base is too small,” Oyedele concluded. “We must reimagine our fiscal policies and take decisive action to expand our budgetary capacity. Only then can we begin to fund meaningful development and create a better future for Nigerians.”

World leaders from the Group of 20 (G20) inaugurated the Global Alliance Against Hunger and Poverty during the opening session of the 19th G20 Heads of State and Government Summit in Rio de Janeiro, Brazil, on Monday.

The ambitious initiative aims to implement transformative measures to eradicate hunger and reduce poverty globally between 2025 and 2030.

The alliance, endorsed by all G20 member countries, empowers a task force to focus on practical activities addressing food insecurity and poverty, which disproportionately impact developing nations. Nigeria, with the majority of its population living below the poverty line, is one of the most severely affected countries and stands to gain significantly from the alliance’s success.

Brazilian President Luiz Inácio Lula da Silva, who spearheaded the alliance, emphasized the importance of collective global action. He noted that more than 80 countries and numerous government and civil society organizations have pledged their support.

“The alliance will mobilize funds and knowledge toward implementing proven public policies and social programs to combat hunger and poverty,” Lula said, highlighting Brazil’s successful experiences with the Zero Hunger and Bolsa Família programs, which lifted millions of Brazilians out of extreme poverty during his previous presidential tenure (2003–2010).

Lula stressed the need for urgent action, describing hunger and poverty as “a biological expression of social ills” rather than a result of resource scarcity. He noted the paradox of global inequality, with the world producing nearly 6 billion tons of food annually while allocating $2.4 trillion to military spending.

“It’s not just about doing justice. This is an essential condition for building more prosperous societies and a world of peace,” Lula remarked.

Financial and Operational Framework

The alliance is designed to accelerate investments and create scalable solutions for poverty reduction. Lula confirmed that international financial institutions and national development banks have rallied behind the initiative. For instance, the Inter-American Development Bank (IDB) has pledged to seek authorization for a $25 billion loan package to fund projects across Latin America and the Caribbean.

To ensure sustainability, the alliance will operate autonomously from G20’s rotating presidencies, with bases in Brasília, managed by the Brazilian Cooperation Agency, and in Rome, through the Food and Agriculture Organization (FAO).

Global Perspective on Hunger and Poverty

The initiative comes at a critical time, as the world faces rising inequalities and a worsening hunger crisis. The Food and Agriculture Organization (FAO) estimates that 733 million people worldwide are suffering from hunger—a number that has grown alarmingly in recent years due to conflicts, climate change, and economic downturns.

The Nigerian Context

As one of the most affected nations, Nigeria exemplifies the critical need for the alliance. With over 200 million people, the country struggles to provide basic amenities for its population.  In 2024, the World Bank estimates that 56% of Nigerians live below the national poverty line, up from 40.1% in 2018. This is due to population growth and high inflation, which have outpaced economic growth. This means that more than 100 million Nigerians face severe financial hardship and are unable to afford essential goods and services.

Nigeria’s food insecurity crisis is equally alarming, with millions suffering from hunger due to economic instability, insecurity, and climate challenges. The ongoing conflict in the northeast has displaced countless families, further compounding food shortages and poverty levels.

In 2024, the World Bank estimates that more than 1 million Nigerians will face a severe food crisis, adding to the 64 million reported in 2023.

An Invitation for Broader Participation

President Lula urged non-G20 countries to join the alliance, emphasizing its inclusive nature and commitment to tackling global poverty.

“Those who have always been invisible will be at the centre of the international agenda,” he said, underlining the need for coordinated efforts to address the root causes of hunger and poverty.

For Nigeria, the Global Alliance Against Hunger and Poverty represents a lifeline amid growing challenges. The country’s government has expressed optimism that the initiative will channel much-needed resources and technical expertise to address its multifaceted poverty crisis.

However, achieving tangible results will require Nigeria to complement global efforts with domestic reforms, particularly in areas such as agriculture.

Nigerian president, Bola Tinubu, who is also at the G20 Summit, said “Nigeria is ready to leverage international cooperation to meet Sustainable Development Goals, particularly zero hunger and poverty eradication while improving citizens’ lives.”

“In my address to fellow world leaders at the G20 Summit in Brazil, I endorsed the creation of the Global Alliance Against Hunger and Poverty, championed by President Lula,” he said. “This bold initiative aligns with my administration’s renewed hope agenda and our commitment to eradicating poverty and fostering sustainable development.”

The G20 summit in Rio de Janeiro said it will continue to outline further commitments and strategies for operationalizing the alliance, marking a pivotal step toward a world free from hunger and poverty.

“This Global Alliance unites governments, international organizations, and civil society, to address both immediate needs and structural causes of hunger and poverty,” Tinubu added.