Nigeria now rates No 4 among the World Bank International Association borrowers’ list.
With $13 billion International Development Association (IDA) debt stock as at 30 June 2022, Nigeria moved one step up in the list as against fourth in the corresponding period last year.
The World Bank Fiscal Year 2021 audited financial statements (IDA financial statement) showed that Nigeria was rated fifth on the list with $11.7bn IDA debt stock as of 30 June 2021.
This shows that Nigeria accumulated about $1.3 billion 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 $486 million from World Bank’s International Bank for Reconstruction and Development.
Remarkably, the top five countries on the list slightly reduced their IDA debt stock except Nigeria.
India, which remains No 1 on the list, reduced its IDA debt stock from $22 billion in the previous fiscal year to $19.7 billion, followed by Bangladesh from $18.1 billion to $18 billion.
Next is Pakistan which cut its debt from $16.4 billion to $15.8 billion, and Vietnam, which went down the list to fifth position, from $14.1 billion to $12.9 billion.
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 may be considered sustainable for now, is 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 (CBN)”.
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.
Economists have also raised concerns over the rising debt profile of the Federal Government.
The Fiscal Policy Partner and Africa Tax Leader of PwC, Mr Taiwo Oyedele expressed his agreement with the World Bank on the high cost of debt servicing.
He said: “I agree with the World Bank. Although the debt to GDP ratio is not too high, if you think about the debt service cost to revenue ratio, it is already over 70 per cent. That’s when you know it’s costly.
“Nigeria borrows at double-digit, and even when we borrow in dollars, the rates are very high and then you devalue the naira and the cost of servicing the debt in naira goes up because it is dollar-dominated debt.
“Put all of that together, and you can easily say to yourself that even though our debt to GDP ratio is very low, our cost of borrowing is unsustainable because it is very high, and therefore, make it very costly.”
A former CBN Deputy Governor, and former presidential candidate, Mr Kingsley Moghalu also criticised government’s increasing borrowing tendency, urging its officials to re-consider other ways of generating revenue for the country.
According to Moghalu, it was also not reasonable to borrow for infrastructural development as the government could expand the public-private partnership options for such development.
In a document by the Director General of the Debt Management Office (DMO), Patience Oniha, recently obtained by The PUNCH, the DMO stated that high debt levels would often lead to high debt services and affect investments in infrastructure.
“High debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy”. Oniha warned.