Nigeria Secures $2.9 Billion, Leads Global Borrowing from World Bank in 2022: Report

In a recent disclosure, the World Bank unveiled that Nigeria emerged as the primary beneficiary of its fresh loans in 2022, with a substantial sum of $2.9 billion disbursed to the country. This revelation was highlighted in the International Debt Report for 2023, wherein Tanzania followed closely with a considerable financial injection of $2.7 billion during the same period.

The official report stated, “Infostride News and Tanzania were the top recipients of new financing from the World Bank in 2022, at US$2.9 billion and US$2.7 billion, respectively.” Further analysis from the Debt Management Office (DMO) external debt stock report reveals that Nigeria’s total indebtedness to the World Bank reached $14.51 billion as of June 30, 2023.

Debt Crisis Looms as Developing Nations Spend $443.5 Billion on Servicing Debts in 2022

In an alarming announcement accompanying the release of the report, the World Bank cautioned that the world’s poorest countries face an imminent risk of debt crises due to the unprecedented surge in global interest rates. The report underscored that “amid the biggest surge in global interest rates in four decades, developing countries spent a record $443.5 billion to service their external public and publicly guaranteed debt in 2022.”

The rise in borrowing costs has diverted critical resources away from essential sectors such as education, health, and the environment. The statement elaborated, “Debt-service payments, which include principal and interest, increased by 5% over the previous year for all developing countries.”

The 75 countries eligible to borrow from the World Bank’s International Development Association (IDA), which supports the poorest nations, collectively paid a staggering $88.9 billion in debt-servicing costs in 2022. Over the past decade, interest payments by these countries have quadrupled, reaching an all-time high of $23.6 billion in 2022. The report predicts a potential 39% surge in overall debt-servicing costs for the 24 poorest countries in 2023 and 2024.

Rising Interest Rates Heighten Vulnerability to Debt

The World Bank pointed out that the escalating interest rates have heightened the vulnerability of all developing nations to debt. Over the last three years, there have been more sovereign defaults than in the entire preceding two decades, impacting ten developing nations. Currently, approximately 60% of low-income nations are either in debt distress or at high risk of entering such a predicament.

Impact of a Stronger US Dollar on Debt Service Payments

The report also shed light on the impact of a stronger US dollar on debt service payments for developing countries. It highlighted, “The stronger US dollar is adding to their difficulties, making it even more expensive for countries to make payments. Under the circumstances, a further rise in interest rates or a sharp drop in export earnings could push them over the edge.”

Expressing concern over the high-interest rates, the World Bank Group’s Chief Economist and Senior Vice President, Indermit Gill, remarked, “Record debt levels and high-interest rates have set many countries on a path to crisis. Every quarter that interest rates stay high results in more developing countries becoming distressed and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure. The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions, emphasizing the need for more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade.”