Nigeria Ranks Fourth On World Bank Debors' List

The World Bank Fiscal Year 2022 audited financial statements, known as the International Development (IDA) borrower's list financial statement, have shown that Nigeria was rated fourth on the list with $13 billion IDA debt stock as of June 30, 2022.

This reflects that Nigeria accumulated about $1.3 billion in IDA debt within a fiscal year, with the country taking over the fourth top debtor position from Vietnam.

The IDA debt is different from the outstanding loan of $486 million from the World Bank’s International Bank for Reconstruction and Development.

As of June 30, 2021, the IDA financial statement, showed that Nigeria was rated fifth on the list with $11.7 billion IDA debt stock as of June 30, 2021.

However, the top five countries on the list slightly reduced their IDA debt stock except for Nigeria.

India, which is still the first on the list reduced its IDA debt stock from $22 billion in the previous fiscal year to $19.7 billion

 Bangladesh from $18.1billion to $18 billion.

It is followed by Pakistan which cut its debt from $16.4 billion to $15.8 billion.

Lastly, Vietnam went down the list to the fifth position, from $14.1billion to $12.9 billion.

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"

The bank also added that Nigeria's debt is also at risk of becoming unsustainable in the event of macro-fiscal shocks.

Economists have also raised concerns over the rising debt profile of the Federal Government.

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

“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.”

Kingsley Moghalu, former Deputy Governor of the Central Bank of Nigeria and former presidential candidate, also encouraged the officials to re-consider other ways of generating revenue for the country.

Also, according to a document by Patience Oniha, the Director General of the Debt Management Office, Patience Oniha, the DMO stated that high debt levels would often lead to heavy debt services.

According to the DMO DG, “High debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy.”