Why World Bank Postponed $8.6bn Loan To Nigeria – Report

The World Bank has postponed a loan of $8.6 billion to Nigeria.

As of July 2023, Nigeria still has approximately $8.25 billion in undisbursed loans from the World Bank.

This information comes from the Summary Statement of Loans/Credit/Grants on the World Bank’s website.

The loans that have not been disbursed include $7.45 billion from the International Development Association and $1.12 billion from the International Bank for Reconstruction and Development.

These undisbursed loans consist of both approved but unsigned loans, as well as signed loan commitments. Over the years, the World Bank has provided loans to Nigeria through its branches, the IBRD and the IDA.

The IBRD lends to middle-income and creditworthy low-income countries’ governments, while the IDA offers concessional loans and grants to governments of the poorest countries.

A previous report by Economic Confidential stated that the undisbursed loans could potentially increase Nigeria’s debt to the World Bank from $12.72 billion to $21 billion.

It showed that the yet-to-be-disbursed loans could increase Nigeria’s debt to the lending institution by 66.27 percent.

This was according to the audited financial statements of the World Bank for the fiscal year 2022, which showed that the bank was yet to disburse about $8.12bn to Nigeria as of June 30, 2022.

Explaining the reason for the yet-to-be-disbursed loans, particularly the signed loan commitments, the bank said, in its 2022 statements, that the “loans are not effective and disbursements do not start until the borrowers and/or guarantors take certain actions and furnish documents.”

Data obtained from the Debt Management Office showed that Nigeria currently owed World Bank $14.33bn as of March 31, 2023.

A breakdown showed that Nigeria $13.84bn IDA loan and a $488.35m loan, according to the DMO’s external debt report.

The Federal Government recently said it has no intention to borrow from any local or foreign organisation with its removal of subsidy on petrol and exchange rate harmonisation.

The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, revealed this at the end of the inaugural Federal Executive Council meeting in Abuja.

However, speaking at a press briefing on Friday, Edun clarified that the Federal Government will still proceed with the loan requirement approved in the 2023 budget.

However, the government wants to stop borrowing for recurrent expenditure and focus only borrowing for capital expenditure.

He said, “Government is not in a position to borrow if you consider 90 per cent debt service to revenue and behind that, a rising debt to GDP ratio. If you look at the last budget, you will see that there is a borrowing requirement built into it, appropriated by the National Assembly. And that is ongoing.

“It is an indication of the commitment of the government to find other sources of funding rather than relying on borrowing and to bring down or even eliminate a certain type of borrowing as soon as possible. That type of borrowing is borrowing for recurrent as opposed to borrowing for capital expenditure, which has a return and which is self-financing.”