Recent media report that the total debt owed to the World Bank Group by Nigeria rose by $660 million in the first six months of 2022, is not only worrisome but it is also an ominous sign of a comatose economy on the fringe of recession. Besides, a heavily indebted nation risks her economic autonomy, sovereignty and territorial integrity as the creditor nations or institutions tend to have control over her affairs.
This is according to data from both the Debt Management Office (DMO) and the financial statements of the World Bank. According to data from the DMO, Nigeria’s debt to the Washington-based bank was $12.38 as of December 31, 2021.
The financial statements of the World Bank for fiscal year 2022 show that Nigeria owes the lending institution $13.04 billion as of June 30, 2022.
The International Bank for Reconstruction and Development and the International Development Association, 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.
Nigeria’s debt to the IDA and IBRD stood at $12.55bn and $486m respectively as of June 30, 2022, compared to $11.97bn and $410.60m in December 32, 2021.
According to a recent Punch report, rising debt has pushed Nigeria up the World Bank’s top 10 IDA borrowers’ list.
The World Bank Fiscal Year 2021 audited financial statements for IDA showed that Nigeria was rated fifth on the list with $11.7bn 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 $13bn IDA debt stock as of June 30, 2022.
This shows that Nigeria accumulated about $1.3bn IDA debt within a fiscal year, with the country taking over the fourth top debtor position from Vietnam.
This debt is different from the outstanding loan of $486m from World Bank’s International Bank for Reconstruction and Development.
The top five countries on the list slightly reduced their IDA debt stock except Nigeria.
Nigeria has the highest IDA debt in Africa, as the top three IDA borrowers (India, Bangladesh and Pakistan) are from Asia.
The World Bank disclosed recently that Nigeria’s debt, which might be considered sustainable for now, was 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.”
However, the Washington-based global financial institution added that the country’s debt was also at risk of becoming unsustainable in the event of macro-fiscal shocks.
The bank further expressed concerns over the nation’s cost of debt servicing, which according to it, disrupted public investments and critical service delivery spending.
The debt overhang of Nigeria is even more disturbing given the fact that the country has in the past 10 years spent a whopping N15.22 trillion to service its domestic and external debts. Analysis of the DMO numbers showed that domestic debt service contributed 88.7per cent or N13.5trillion, while external debt interest/service contributed 11.35 per cent or N1.73 trillion ($5.3 billion) out of the N15.1trillion total debt services between 2012 and 2021.
It was also reported that the federal government in 10 years has consistently paid interest on its Nigerian Treasury Bills (NTB), FGN Bonds, Sukuk Bonds, Saving Bonds and Nigerian Treasury Bonds, while interest on Multilateral, Eurobond borrowings among others continued to increase steadily.
The DMO data revealed that interest on NTBs and FGN Bonds, two major instruments the government used in borrowing funds to bridge the budget deficit, amounted to N3.4trillion and N9.27trillion in 10 years, respectively.
The external debt interest/service on Multilateral and Eurobond, two major sources the federal government borrowed funds from foreign financial institutions amounted to $940.86million and $3.42billion in the years under consideration.
The multilateral financial institutions the federal government pays interest/service on loans borrowed are: International Bank for Reconstruction and Development, Africa Dev. Bank, International Fund for Agric. Dev., Africa Dev. Fund, European Dev. Fund, Arab Bank for Economic Development in Africa (BADEA), among others.
A further look at the data showed that federal government domestic debt stock by Instrument moved to N19.24 trillion as at December 31st, 2021 from N6.54trillion reported by DMO in 2012, while Nigeria’s External Debt Stock closed 2021 at $38.391million from $6.527million in 2012.
It is also worth noting that N2.05trillion and $1.10billion spent on servicing domestic debts and external debts in 2021 were the highest on DMO record.
Barring any change in plans, the federal government is to spend a cumulative amount of $10.19billion servicing the nation’s external debt obligation within a 10 years period covering 2021 and 2030, according to DMO.
However, since the cartel decided to increase production, Nigeria has found it difficult to meet its own quota, despite a significant surge in the price of crude oil.
On the backdrop of this bullish economic outlook due to the deadly debt trap, we urge the federal government to intensify its efforts towards the diversification of the economy.
The country’s reliance on crude oil proceeds and its import dependency have over the years proven to be counter-productive and harmful to the economy. Nigeria must, therefore, diversify its economy and revitalise its real or productive sector in order to free itself from excessive debts.
