The fresh $1.5bn World Bank loan

Despite exceeding the borrowing limits, the Federal Government is negotiating a fresh $1.5 billion World Bank loan. The government explained that the loan would be used to fund climate resilience projects in some parts of the country, early childhood development and social protection. When approved by the World Bank, each of these three critical interventions will gulp $500 million, respectively.  Available information shows that the World Bank will consider the approval of climate resilience facility on October 29, 2026, while that of early childhood development will be on March 15, 2027, and social protection project will be on March 16, 2027.

The proposed facilities are concessional credits, which will be granted through the International Development Association, with low interest rate and repayment spread over a long period of time. However, data released by the Debt Management Office (DMO) showed that Nigeria’s debt profile has risen to N166.79 trillion as of June 2026. The new debt figure compiled by DMO indicates that Nigeria’s public debt rose by 90.9 per cent under the President Bola Tinubu administration. It increased by N87.4 trillion to N166.79 trillion in June 2026 from N79.39 trillion in May 2023. Experts have opined that if the current borrowing spree continues, Nigeria’s public debt will hit all-time high of N188 trillion by the end of 2026. A further breakdown by the DMO shows that the country’s external debt rose by 28.4 per cent to $54.52 billion as of June 2026, while domestic debt increased by 55 per cent to N91.59 trillion. 

The current total public debt means that each citizen of Nigeria owes N716,822. This represents 87 per cent increase from N383,442 three years ago. It is worrisome that the government has not justified previous loans taken, their impact on the country’s development and the welfare of the people before embarking on the fresh loan negotiation. The borrowing binge by the present administration comes with disturbing revelation that Nigeria has repeatedly exceeded its statutory threshold amid a rapidly surging public debt profile. The Federal Government has reportedly overshot its approved ceiling by N4.79 trillion, raising a total of N12.62 trillion due to revenue shortfall. Beyond that, fiscal figure indicates continuous over-borrowing well above prorated Appropriation Acts as new loan request of $1.5 billion from the World Bank will pile up fiscal implications and potential risks that could put Nigerian economy in a cliffhanger.

Statistics show that actual government revenues have consistently fallen short of prorata projections in the Medium Term Expenditure Framework. High debt-servicing burdens continue to choke public capital expenditure and national budgets, a situation that has forced the federal government to extend the implementation of capital expenditure projects to next year. The immediate risk implication is that excessive domestic borrowing risks crowding out private sector credit and stoking inflationary pressure. 

All of this means that Nigeria’s rising debt profile requires greater scrutiny. The proposed additional $1.5bn borrowing plan from the World Bank should be carefully assessed based on its purpose, cost implications, repayment terms and economic value expected from the funds. The government should exercise caution over excessive borrowing. There is need for a moratorium on further borrowing.   

Key consideration should be whether the fresh borrowing would finance productive investments capable of generating jobs, increasing revenue and supporting sustainable economic growth. There is nothing wrong with borrowing. However, all loans must be judiciously utilised. We should not borrow for consumption. Loans must be invested in the productive sectors of the economy. There must be transparency in the management of our loans. We call for accountability and openness in the management of these loans. There should be no room for opacity. 

The Federal Government should demonstrate how previous and current borrowed funds would translate into tangible outcomes. The government should also show how the loans are invested as well as the expected outcomes with predictable timelines. The government should have robust loan repayment plans.

When the World Bank loan is approved, the federal government should strictly deploy the credit facility towards non-recurrent capital investments, critical power infrastructure and verifiable social safety nets to cushion economic reforms.

The government should be reminded that international development financing is strictly designed to avoid funding recurrent government overhead. Let the government curb its unbridled appetite for loans and use the available resources to revamp the economy.