Nigeria’s Debt to IDA Rises to $17.1bn, Retains Third Place Among Largest Borrowers

AkoniTV November 19, 2024 Business Leave a comment 45 Views

Nigeria’s debt to the International Development Association (IDA), the concessional arm of the World Bank, has climbed to $17.1 billion as of September 30, 2024, solidifying its position as the third-largest debtor to the institution.

The World Bank’s financial statements for the fiscal year ending September 2024 reveal that Nigeria’s exposure to the IDA increased by $600 million in just three months, rising from $16.5 billion in June 2024. This followed a significant 14.4 percent rise from the $14.3 billion recorded in June 2023.

The fiscal year, running from July 2023 to June 2024, saw Nigeria secure an additional $2.2 billion in loans. Notably, in June 2024, the country entered the top three IDA borrowers for the first time, moving up from fourth place in 2023. Since then, Nigeria has maintained this position, having received a total of $2.8 billion in concessional loans under President Bola Tinubu’s administration.

Bangladesh and Pakistan occupy the first and second spots on the list, with debt exposures of $21 billion and $18.5 billion, respectively. India follows Nigeria in fourth place, with a debt profile of $15.9 billion, while Ethiopia owes $13.1 billion.

Other notable 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. Collectively, the ten largest IDA borrowers account for 63 percent of the association’s total exposure, underscoring their dependence on concessional financing.

The IDA has set its Single Borrower Limit (SBL) for fiscal year 2025 at $47.5 billion, representing 25 percent of its equity of $190.3 billion as of June 30, 2024. Despite Nigeria’s significant debt level, the country remains within this threshold, which the World Bank currently views as non-restrictive.

“As of September 30, 2024, the ten countries with the highest exposures accounted for 63 percent of IDA’s total exposure. Monitoring these exposures relative to the SBL requires consideration of the repayment profiles of existing loans, as well as disbursement profiles and projected new loans and guarantees,” the World Bank’s financial statements noted.

Nigeria’s loans from the IDA, characterized by low-interest rates and extended repayment terms, are distinct from its higher-cost obligations to the World Bank’s International Bank for Reconstruction and Development (IBRD), which lends at market rates. These concessional loans have become a critical component of Nigeria’s funding strategy, particularly as President Tinubu manages inherited debt and implements economic reforms.

The country’s rising external debt servicing obligations have added to its fiscal challenges. In the first nine months of 2024, the Federal Government spent $3.58 billion on foreign debt servicing, a 39.77 percent increase from the $2.56 billion spent during the same period in 2023. These figures, derived from Central Bank of Nigeria data on international payments, reflect mounting fiscal pressure amid ongoing economic difficulties.

With Nigeria’s fiscal stability increasingly strained, the government faces the dual challenge of addressing rising debt levels and ensuring sustainable economic growth in the face of persistent economic headwinds.