THE Debt Management Office (DMO) says Nigeria’s indebtedness to the World Bank, which grew from 6.29 billion dollars in 2015 to 13.46 billion dollars in 2022 is a positive development.
In a clarification statement issued Wednesday, the office argued that the loans are issued at concessionary rates with long-term repayments plan.
Prior to this DMO’s clarification statement, there are concerns over controversy about World Bank loans to the country in recent times, as Nigeria prepares for a post-petroleum subsidy era.
For instance, at the just concluded Spring meetings held at Washington DC-United States, some Civil Liberty Organisations-CLO urged the World Bank to stop loan issuance to the Federal Government.This was in particular reference to the proposed $800 million facility that focused on palliatives for vulnerable Nigerians in a post subsidy era.
The palliatives are meant for over 50 million Nigerians ahead of June 2023.
The DMO stressed that loans from the World Bank come from the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) are issued at concessionary repayment rates.
“IDA loans are concessional, that is, they allow low charges and are for very long tenors in some cases, exceeding 30 years.
“These are the types of loans required to fund development in countries such as Nigeria.
“By accessing IDA funding, the government is actively reducing debt service costs, since non-concessional funding are usually more expensive.
“Indeed, it will be inefficient for Nigeria to borrow from commercial sources when concessional funding sources such as ODA is available,” the DMO said.
It said that Medium-Term Debt Management Strategy (MTDS 2020-2023) outlined effective debt management models for the country.
“The MTDS actually states that we will maximise funds available to Nigeria from multilateral and bilateral sources in order to access cheaper and longer tenor funds.
“Therefore, borrowing from IDA is actually an implementation of this strategy.
Contrary to DMO’s stance, the World Bank, in its latest report says Nigeria spent 96.3 percent of its 2022 revenue on servicing its debts.
This was contained in the Macro Poverty Outlook for Nigeria: April 2023 brief released by the Global lending financial institution.
The report notes that Nigeria’s fiscal position deteriorated in 2022, leaving the cost of the petrol subsidy to increase from 0.7 percent to 2.3 percent of gross domestic product (GDP).
“This has kept the public debt stock at over 38 percent of GDP and pushed the debt service to revenue ratio from 83.2 percent in 2021 to 96.3 percent in 2022,” it read.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.