Nigeria has emerged as the third-largest debtor to the World Bank’s International Development Association (IDA) as of June 30, 2024, intensifying the growing unease surrounding Nigeria’s public debt.
In a detailed financial statement released by the World Bank, Nigeria’s exposure to the IDA soared by 14.4%, climbing from $14.3 billion in the fiscal year (FY) 2023 to a substantial $16.5 billion by the close of FY2024. This $2.2 billion increase not only places Nigeria among the top three IDA debtors for the first time but also signifies a dramatic shift from its previous rank as the fourth-largest borrower in 2023.
This leap into the top three debtor nations highlights Nigeria’s escalating dependence on international financing amidst its ongoing economic challenges. The fiscal year 2024, spanning from July 2023 to June 2024, has seen Nigeria receiving at least $2.2 billion from the World Bank, a financial influx occurring under President Bola Tinubu’s administration.
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It is essential to note that this debt is separate from any outstanding loans Nigeria has with the World Bank’s International Bank for Reconstruction and Development (IBRD).
Comparative Analysis of Other IDA Debtors
Nigeria’s ascent in the IDA debtor ranks is set against a broader backdrop of global borrowing trends. Bangladesh retains its position as the largest IDA debtor, with its exposure increasing from $19.3 billion in 2023 to $20.5 billion in 2024. Pakistan follows closely, maintaining its second-place standing with a stable exposure of $17.9 billion. Meanwhile, India, which held the third spot in 2023 with an IDA exposure of $17.9 billion, experienced a decrease to $15.9 billion in 2024, paving the way for Nigeria to surpass it.
Other significant IDA borrowers include Ethiopia, which saw its exposure rise from $11.6 billion in 2023 to $12.2 billion in 2024, and Kenya and Vietnam, each with $12.0 billion in 2024. These nations, along with Tanzania, Ghana, and Uganda, make up the top ten IDA debtors, collectively accounting for 63% of the IDA’s total exposure as of June 30, 2024.
The Implications for Nigeria’s Public Debt
This development has not only propelled Nigeria into the spotlight of global debt but has also amplified domestic concerns over the country’s growing public debt burden. The increasing reliance on international loans, particularly from the World Bank’s concessional arm, raises questions about Nigeria’s long-term economic sustainability and its ability to manage and service this mounting debt.
The IDA plays a crucial role in providing concessional loans and grants to the world’s poorest countries, offering financial support with low interest rates and extended repayment periods. These loans are designed to foster economic growth, reduce inequalities, and improve living conditions in developing countries.
However, Nigeria’s ballooning debt profile under the IDA now casts a shadow over these objectives, as the nation grapples with rising external debt servicing costs.
Nigeria has secured a total of $4.95 billion in loans from the World Bank under President Tinubu’s administration, although it has so far received only about 16% of the funds, suggesting a potential delay in disbursement or challenges in project implementation.
The Debt Management Office (DMO) data reveals that as of March 31, 2024, Nigeria owed the World Bank a total of $15.59 billion. With the possibility of an additional $2 billion in loans being approved for Nigeria this year, the nation’s public debt is poised to swell even further, heightening the urgency for effective debt management strategies.
While the concessional nature of IDA loans offers some relief in terms of low interest rates and extended repayment periods, it also adds to the long-term impact of rising debt on Nigeria’s economy.