In a recent disclosure, the World Bank revealed that Nigeria claimed the title of the leading recipient of its fresh loans in 2022, securing a substantial $2.9 billion. Tanzania followed closely, receiving $2.7 billion in a comparable period.
The International Debt Report for 2023 released by the World Bank highlighted the significance of these financial inflows to Nigeria and Tanzania, stating, “Nigeria 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.”
According to data from the external debt stock report of Nigeria’s Debt Management Office (DMO), the country’s total owed to the World Bank amounted to $14.51 billion as of June 30, 2023.
The World Bank, in a statement accompanying the report on Wednesday, cautioned that the surge in global interest rates poses a potential risk of debt crises, particularly for the poorest countries. The report revealed that developing countries collectively spent $443.5 billion on servicing their external public and publicly guaranteed debt in 2022.
The statement highlighted the adverse impact of rising borrowing costs, diverting resources from crucial sectors such as education, health, and the environment. It stated, “Debt-service payments, which include principal and interest, increased by 5% over the previous year for all developing countries.”
Specifically, the 75 countries eligible to borrow from the World Bank’s International Development Association (IDA), which supports the poorest nations, incurred a record $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 projected a further increase in debt-servicing costs for the 24 poorest countries by as much as 39% in 2023 and 2024. The World Bank warned of heightened vulnerability to debt for all developing nations due to rising interest rates, resulting in more sovereign defaults in the last three years than in the preceding two decades.
The impact of a stronger US dollar on debt service payments for developing countries was also noted in the report. The World Bank called for coordinated action by debtor governments, private and official creditors, and multilateral financial institutions to address the situation and avoid a potential crisis, emphasizing transparency, better debt sustainability tools, and swifter restructuring arrangements.
