Nigeria and three others top World Bank list of debtors

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The increase in debt propelled Nigeria into the World Bank’s International Development Association’s list of top 10 borrowers.

The World Bank’s audited financial statements for fiscal year 2021, known as the IDA Financial Statements, showed Nigeria ranked fifth on the list with an IDA debt stock of 11, $7 billion as of June 30, 2021.

However, the recently released audited financial statements of IDA for FY 2022 from the World Bank showed that Nigeria moved to fourth position on the list, with outstanding IDA debt of $13 billion. dollars as of June 30, 2022.

This shows that Nigeria has accrued about $1.3 billion in IDA debt in one fiscal year, with the country taking Vietnam’s fourth largest debtor position.

This debt is different from the outstanding loan of $486 million from the World Bank for reconstruction and development.

The top five countries on the list have slightly reduced their outstanding debt with IDA, with the exception of Nigeria.

India, still first on the list, reduced its stock of IDA debt by $22 billion in the previous fiscal year to $19.7 billion, followed by Bangladesh by $18.1 billion. at $18 billion.

It is followed by Pakistan, which reduced its debt from $16.4 billion to $15.8 billion, and finally Vietnam, which fell to fifth position, from $14.1 billion to $12.9 billion. of dollars.

Nigeria has the highest IDA debt in Africa, as the top three IDA borrowers (India, Bangladesh and Pakistan) are from Asia. The World Bank recently revealed that Nigeria’s debt, which can be considered sustainable for now, is vulnerable and costly.

The bank said: “Nigeria’s debt remains sustainable, albeit vulnerable and costly, particularly given the large and growing funding from the Central Bank of Nigeria.”

However, the Washington-based global financial institution added that the country’s debt also risks becoming unsustainable in the event of macro-fiscal shocks.

The bank further expressed concern over the cost of servicing the country’s debt, which it said has disrupted public investment and essential spending on service delivery.

Economists have also expressed concerns about the rising profile of federal government debt.

PwC’s Fiscal Policy Partner and Africa Tax Leader, Mr. Taiwo Oyedele, expressed his agreement with the World Bank on the high cost of servicing debt.

He said, “I agree with the World Bank. Although the debt-to-GDP ratio is not too high, if you think about the ratio of the cost of servicing debt to revenue, it is already over 70%. That’s when you know it’s expensive.

“Nigeria is borrowing at double digits, and even when we are borrowing in dollars the rates are very high and then you devalue the naira and the cost of servicing the naira debt goes up because it is a debt dominated by the dollar.

“Put all of this together, and you can easily tell yourself that even though our debt-to-GDP ratio is very low, our cost of borrowing is unsustainable because it’s very high, and therefore, makes it very expensive.”

A former Central Bank of Nigeria deputy governor and former presidential candidate, Kingsley Moghalu, also criticized the growing trend of government borrowing, urging officials to reconsider other ways of generating revenue for the country. .

According to Moghalu, it was also unwise to borrow for infrastructure development, as the government could expand public-private partnership options for such development.

In a document from Debt Management Office Director General Patience Oniha, recently obtained by our correspondent, the DMO said high debt levels will often result in high debt servicing and affect infrastructure investment.

According to the DG DMO, “high debt levels lead to heavy debt servicing which reduces the resources available to invest in infrastructure and key sectors of the economy”.

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