The Federal Government of Nigeria led by President Bola Tinubu, has requested a new loan of $400m from the World Bank to fund the conditional cash transfer programme for 15 million households.
This is one of the measures to mitigate the impact of the petrol subsidy removal on Nigerians, which has caused a sharp increase in the cost of living.
The new loan will bring the total amount borrowed from the World Bank for the cash transfer programme to $1.2bn, as the previous administration of President Muhammadu Buhari had already secured a loan of $800m for the same purpose. The loan was meant to be accessed by the succeeding administration.
President Bola Tinubu announced the conditional cash transfer programme in his national address on October 1, 2023, to mark the country’s independence anniversary. He said that the Federal Government would pay N25,000 monthly to 15 million households for three months, starting from October to December 2023.
He also announced that the Federal Government had approved a provisional allowance of N25,000 for junior federal workers for six months, following negotiations with labour unions and other stakeholders. He said that this was to increase the federal minimum wage without causing excessive inflation.
“For the next six months, the average low-grade worker shall receive an additional N25,000 per month,” the President stated.
However, after protests and threats of strike action by the organised labour and other groups, who felt excluded and marginalised by the initial announcement, the government revised its decision and increased the provisional allowance to N35,000 for all treasury-paid Federal Government workers for six months.
A top government official, who spoke on condition of anonymity, told Sunday PUNCH that the government would fund the N35,000 allowance by sending a supplementary appropriation bill to the National Assembly. He said that this was different from the conditional cash transfer programme, which would be funded by the World Bank loan.
“The government is funding the N35,000 wage increase for all federal civil servants and it is not taking a loan. The one the government is taking a loan for is the one of N25,000 multiplied by three months for 15 million households. There is a loan of $800m on this one and the government is adding $400m, making it $1.2bn, which will be used for the conditional cash transfer.
“But, the other one (cash award to federal civil servants), the government will fund it. So, most likely there will be a supplementary appropriation for that because it is illegal to spend money out of the government budget,” the source said.
Meanwhile, Nigeria has maintained its fourth position on the World Bank’s top 10 International Development Association borrowers’ list. This was after moving up from fifth position in the 2022 fiscal year.
Despite maintaining its fourth position, the country accumulated about $1.3bn debt within a one-year period.
The World Bank Fiscal Year 2022 audited financial statement showed that Nigeria moved to the fourth position on the list with $13bn IDA debt stock as of June 30, 2022.
However, the World Bank Fiscal Year 2023 audited financial statement showed that Nigeria owed about $14.3bn IDA debt stock as of June 30, 2023, but maintained its fourth position on the list.
Sunday PUNCH further observed that Bangladesh ($19.3bn) moved up the list to become the topmost IDA debtor, taking over from India ($17.9bn debt), which fell to the second position.
Pakistan maintained its third position with $14.9bn debt stock as of June 30, 2023. Ethiopia ($12.7bn), Kenya ($10.5bn), Tanzania ($9.8bn), Ghana ($8.8bn), Uganda ($7.9bn) and Vietnam ($7.8bn) occupied positions five to ten respectively on.
Nigeria has the highest IDA debt in Africa, while the top three borrowers, Bangladesh, India, and Pakistan, are from Asia.
Also, in the World Bank 2023 Annual Report, Nigeria was among the top 10 countries that acquired fresh IDA loans this year.
The report showed that the bank committed $1.55bn to Nigeria in the fiscal year of 2023, with the country recognised as the ninth-highest beneficiary.
Sunday PUNCH recently reported that the Federal Government was engaging the World Bank on a fresh $1.5bn loan.
The loan is titled ‘Nigeria Human Capital for Opportunities and Empowerment’ based on information obtained from the website of the Washington-based bank.
The objective of the loan is “to strengthen systems for improved delivery of basic education and primary health services in participating states.”
The loan is meant to be implemented in 2024, pending approval by the board of the World Bank Group.
The International Bank for Reconstruction and Development and the International Development Association, which make up the World Bank, have over the years advanced loans to Nigeria.
The IBRD lends to governments of middle-income and creditworthy low-income countries, while the IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.
The World Bank is Nigeria’s biggest multilateral creditor, with the country owing about $14.51bn as of June 30, 2023.
Further breakdown showed that Nigeria had $14.03bn IDA debt and $485.75m IBRD debt by the second quarter of 2023.
The Debt Management Office recently said the country’s total public debt hit N87.38tn at the end of the second quarter of this year.
The figure represents an increase of 75.29 per cent or N37.53tn compared to N49.85tn recorded at the end of March 2023.
Further breakdown shows that Nigeria has a total domestic debt of N54.13tn and a total external debt of N33.25tn.The figure represents an increase of 75.29 per cent or N37.53tn compared to N49.85tn recorded at the end of March 2023.
Further breakdown shows that Nigeria has a total domestic debt of N54.13tn and a total external debt of N33.25tn.
While the domestic debt makes up 61.95 per cent of the total debt, the external makes up 38.05 per cent.
It was also observed that there was a significant increase in both domestic and external debt within three months.
The domestic debt rose by 79.18 per cent from N30.21tn while the external debt rose by 69.28 per cent from N19.64tn in Q1 2023.
In its 2022 Debt Sustainability Analysis Report, the DMO warned that the Federal Government’s projected revenue of N10tn for 2023 could not support fresh borrowings.
According to the office, the projected government’s debt service-to-revenue ratio of 73.5 per cent is high and a threat to debt sustainability.
It noted that the government’s current revenue profile could not support higher levels of borrowing.
In a report titled, ‘Report of the Annual National Market Access Country Debt Sustainability Analysis,’ the debt office said, “The projected FGN debt service-to-revenue ratio at 73.5 per cent for 2023 is high and a threat to debt sustainability.
“It means that the revenue profile cannot support higher levels of borrowing. Attaining a sustainable FGN debt service-to-revenue ratio would require an increase of FGN revenue from N10.49tn projected in the 2023 budget to about N15.5tn.”
The DMO stated that the government must pay attention to revenue generation by implementing far-reaching revenue mobilisation initiatives and reforms, including the Strategic Revenue Growth Initiatives and all its pillars with a view to raising the country’s tax revenue to GDP ratio from about seven per cent to that of its peer.
The Federal Government would be unable to borrow a lot as it nears its self-imposed debt limit of 40 per cent, the DMO said.
To reduce borrowing and budget deficit, it stated that the government should encourage the private sector to fund some of the capital projects that were being financed from borrowing through the public-private partnership schemes.
It added that the Federal Government could reduce borrowing through the privatisation and/or sale of government assets.