“Government in Talks for $1.5bn World Bank Loan”
The Federal Government of Nigeria is in discussions with the World Bank for a new loan of $1.5 billion. This loan, called the ‘Nigeria Human Capital for Opportunities and Empowerment’ (HOPE), is aimed at strengthening systems for improved delivery of basic education and primary health services in participating states. The loan is scheduled to be implemented in 2024, pending approval by the World Bank Group’s board.
Additionally, there are discussions on five other loan projects, including funds for internally displaced persons, rural access and agricultural marketing, renewable energy, sustainable power and irrigation, and accelerating resource mobilization for reforms. These discussions will determine whether the loans become active or are dropped.
Nigeria has already secured a total of $1.95 billion in loans from the World Bank in the first four months of President Bola Tinubu’s administration. The loans are intended to support various sectors, including the power sector, women’s empowerment, and adolescent girls’ learning and empowerment.
However, Nigeria’s increasing debt burden has raised concerns, with the country owing about $14.51 billion to the World Bank as of June 30, 2023. The Debt Management Office (DMO) has warned that the government’s projected revenue for 2023 may not be sufficient to support additional borrowings, and the debt service-to-revenue ratio is high and a threat to debt sustainability.
Despite these concerns, the government has stated that it will stick to its borrowing plan, although it acknowledges the need to explore alternative ways to reduce reliance on borrowing and increase revenue generation.
Experts have cautioned against new borrowings and called for a thorough review of existing loans and their utilization to ensure economic growth. They also recommend measures to cut the cost of governance and increase transparency in the use of borrowed funds. Some have suggested a moratorium on debt or debt buyback to alleviate the burden of debt servicing.
The International Monetary Fund (IMF) has advised Nigeria to strengthen oil production and the tax base to stabilize its economy and reduce reliance on new financing. IMF representatives also stressed the need to improve revenue collection, broaden the tax base, and ensure good governance in fund utilization.