The World Bank in it’s International Debt Report for 2023 has revealed that Nigeria is the leading recipient of fresh loans from the World Bank in 2022, securing an impressive $2.9 billion.
This financial influx positions Nigeria ahead of other nations, with Tanzania closely following at $2.7 billion.
As of June 30, 2023, Nigeria’s total debt owed to the World Bank is recorded at $14.51 billion, as per data from the Debt Management Office’s external debt stock report.
This substantial financial support is expected to aid Nigeria’s developmental initiatives; however, concerns arise regarding the nation’s debt sustainability amid global economic challenges.
The World Bank’s warning of a potential debt crisis looms large as developing countries grapple with a record $443.5 billion spent on servicing external public and publicly guaranteed debt in 2022. The surge in global interest rates has diverted significant resources from essential sectors such as education, health, and the environment.
The report highlights that interest payments for the 75 countries eligible to borrow from the International Development Association (IDA) have quadrupled over the past decade, reaching an unprecedented $23.6 billion in 2022.
The report emphasizes the urgent need for coordinated action to address the challenges posed by high-interest rates and the potential for another lost decade if swift and transparent measures are not implemented.
The report read:
“The stronger US dollar is adding to their difficulties, making it even more expensive for countries to make payments. Under the circumstances, a further rise in interest rates or a sharp drop in export earnings could push them over the edge.
“As debt-servicing costs have climbed, new financing options for developing countries have dwindled.”
Speaking on the high-interest rates, the World Bank Group’s Chief Economist and Senior Vice President, Indermit Gill, said:
“Record debt levels and high-interest rates have set many countries on a path to crisis. Every quarter that interest rates stay high results in more developing countries becoming distressed and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.
“The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade.’’