Economy

World Bank raises concern over Nigeria’s debt servicing

The World Bank’s Lead Economist for Nigeria, Alex Sienaert, has projected that Nigeria’s debt servicing in 2023 will gulp 123.4 per cent of the Federal Government’s revenue, the same concerns earlier expressed by the Labour Party presidential candidate, Mr. Peter Obi.

 

Sienaert expressed the concern in a presentation titled ‘Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustainable Development Results.’ for the month of November 2022.

 

World Bank also revised its debt servicing projection for 2022, stating that 100.2 per cent of Federal Government revenue would be gulped by debt servicing.

 

This is below the 102.3 per cent previously projected for the end of 2022 in the World Bank’s Africa’s Pulse report, which is a biannual analysis of the near-term macroeconomic outlook for the region.

 

The report, published in April and October during the World Bank/IMF Spring and Annual Meetings, had raised concerns over Nigeria’s public debt.

 

Nigeria’s total debt stock rose to N44.06 trillion as of September 2022, according to the Debt Management Office (DMO), from N39.56 trillion at the end of last year.

 

In his presentation, Sienaert said debt servicing would not give room for productive spending, therefore borrowing is not the solution to Nigeria’s problem.

 

“Borrowing more is not the solution: debt costs are rising rapidly, squeezing non-interest spending,” he said, adding: “Debt servicing has surged over the past decade and is expected to continue increasing over the medium-term, crowding out productive spending.”

 

The Federal government has significantly increased its borrowings, as the World Bank had revealed that in 2021, $9 billion was obtained from International Monetary Fund (IMF) credit and Special Drawing Rights (SDR), against $2.58 billion in 2010.

 

Also, the World Bank, in a report on ‘poorest countries eligible to borrow from the World Bank’s International Development Association (IDA)’ had stated that Nigeria and other low and middle-income economies were already at high risk of debt distress or already in distress.

 

In fact, Peter Obi had warned that the Federal government is spending beyond its revenue, stating in his manifesto that 116 per cent of government revenue was disbursed on debt servicing.

 

Obi said debt servicing overshooting revenue comes at a period tax contributions to gross domestic product (GDP) falls below Africa’s average ratio. Nigeria’s tax to GDP ratio is 6 per cent, falling short of the African average of 17 per cent.

 

According to him, Nigeria’s debt-servicing ratio and debt to revenue ratio will drastically reduce if he is elected President in 2023 election, as his administration will implement radical economic policies.

 

 

 

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