Nigeria’s Significant Increase in Debt Servicing to World Bank and IMF in 2024

In 2024, Nigeria’s debt service to the World Bank and IMF reached $2.32 billion, a significant rise from 2023. The IMF accounted for a large portion of these repayments, reflecting a growing dependency on multilateral support amid increasing external debt. Nigeria is also shifting towards equity investments while continuing to rely on World Bank loans for ongoing reforms.

In 2024, Nigeria allocated $2.32 billion to servicing its debt to the World Bank and the International Monetary Fund (IMF), marking a substantial increase from the $998.92 million paid in 2023, according to the Debt Management Office. The report reveals Nigeria’s payment of $689.44 million to the World Bank, which includes $663.23 million to the International Development Association and $26.21 million to the International Bank for Reconstruction and Development. Furthermore, the IMF received $1.63 billion wholly attributed to principal repayments with no additional interest charges recorded.

The year-on-year increase in total payments to both the World Bank and IMF exceeded 134 percent, primarily reflecting Nigeria’s heightened repayments to the IMF. Overall, Nigeria’s external debt service totaled $4.66 billion in 2024, up from $3.5 billion the previous year, with multilateral creditors accounting for $2.62 billion, comprising 56 percent of total debt servicing.

Notably, the IMF represented 35 percent of Nigeria’s total external debt servicing in 2024 and approximately 62 percent of payments to multilateral lenders. Payments to commercial creditors fell to $1.47 billion from $1.93 billion in 2023, while bilateral creditors received $570.67 million, a rise from $344.57 million in 2023. Still, this decline in commercial debt servicing did not balance the dramatic increase in payments to multilateral lenders, notably the IMF.

Nigeria’s payments to the International Development Association remained significant at over $663 million, highlighting it as Nigeria’s largest multilateral creditor. This included principal repayments of $414.86 million and $248.10 million in interest charges. These trends point to Nigeria’s growing dependency on multilateral financial support, which increasingly influences the nation’s fiscal landscape amidst ongoing revenue challenges and naira stability pressures.

As of December 31, 2024, Nigeria’s total external debt stock escalated to $45.78 billion, rising from the previous year’s figure of $42.50 billion, driven mainly by increased borrowings from the World Bank Group. Particularly, debt to the World Bank surged to $17.81 billion in 2024, contrasting with a decline in obligations to the IMF, which dropped significantly from $2.47 billion in 2023 to $800.23 million.

Consequently, loans from the World Bank constituted 79.8 percent of Nigeria’s total multilateral debt in 2024, reflecting a significant rise from 73.1 percent in 2023. The share of the IMF in Nigeria’s multilateral debt decreased to 3.6 percent, emphasizing a shift toward World Bank financing. Collectively, the World Bank and IMF constituted 40.6 percent of Nigeria’s total external debt, showcasing a slight drop due to the increasing overall debt stock.

The pronounced rise in Nigeria’s debt with the World Bank showcases a continued reliance on development financing, primarily through concessional loans from the International Development Association, which are designed for long-term projects. At a recent Corporate Governance Forum in Abuja, Nigeria’s Minister of Finance Wale Edun discussed the government’s transition from debt reliance to equity investments and revenue-generating strategies. This transformative approach aims to leverage private sector involvement while continuing to seek World Bank assistance for necessary reforms.

To summarize, Nigeria’s debt servicing to the World Bank and IMF has escalated significantly in 2024, highlighting a growing reliance on multilateral financing amidst rising external debt. The increase in payments to these institutions has major implications for the nation’s fiscal management, especially as the country navigates challenging economic circumstances. The government is also shifting focus towards equity investments, aiming to balance its approach to financing and enhance revenue generation while maintaining its borrowing strategy with multilateral institutions.

Original Source: punchng.com