Nigeria’s public debt has breached the N101 trillion mark, driven by a substantial influx of loans from the World Bank totaling $4.95 billion over the past twelve months.

This surge in borrowing has raised concerns about the country’s ability to service its growing debt obligations amidst economic challenges exacerbated by the COVID-19 pandemic and fluctuating global oil prices.

As of December 2023, Nigeria’s debt stood at approximately N97 trillion, according to data from the Debt Management Office (DMO).

The recent borrowing spree has propelled this figure to N101 trillion, reflecting a rapid escalation in the country’s indebtedness.

The loans from the World Bank are earmarked for various developmental projects, including critical sectors such as power, women empowerment, education, renewable energy, and economic reforms.

These initiatives are part of Nigeria’s broader strategy to enhance infrastructure, socio-economic development, and institutional reforms aimed at bolstering long-term growth and resilience.

The breakdown of the World Bank funding includes $750 million allocated for power sector financing aimed at improving electricity generation and distribution, which remains a persistent challenge in Nigeria.

Another $500 million is dedicated to women’s empowerment programs, focusing on expanding opportunities and economic inclusion for women across the country.

Also, $700 million has been allocated to support education initiatives, particularly for adolescent girls under the Adolescent Girls Initiative for Learning and Empowerment project.

This funding seeks to enhance access to quality education and empower young girls in Nigeria.

Moreover, the World Bank has committed $750 million to the Distributed Access through Renewable Energy Scale-up project, aimed at increasing electricity access through renewable energy solutions.

This initiative targets over 17.5 million Nigerians who currently lack reliable electricity.

The largest tranche of $1.5 billion is designated for Economic Stabilisation to Enable Transformation Development Policy Financing Programme. This funding is intended to bolster fiscal revenues, expand social safety nets, and support economic diversification efforts to reduce dependency on oil revenues.

Despite these investments aimed at driving economic growth and improving living standards, concerns linger over Nigeria’s ability to effectively manage its escalating debt burden.

The country’s debt servicing costs have risen significantly, diverting resources away from critical sectors such as healthcare, education, and infrastructure development.

Critics argue that while external financing is necessary for development, the government must ensure transparency, accountability, and effective utilization of borrowed funds to avoid the pitfalls of previous debt mismanagement.

There is also a growing call for stringent fiscal discipline and reforms to enhance revenue generation and reduce dependency on borrowing.

President Muhammadu Buhari’s administration has defended the borrowing, asserting that it is crucial for bridging infrastructure gaps, stimulating economic growth, and creating job opportunities.

However, stakeholders emphasize the need for prudent debt management and sustainable economic policies to safeguard Nigeria’s financial stability and long-term prosperity.

China’s central bank, the People’s Bank of China (PBOC), has decided to keep the key interest rate steady for the tenth consecutive month.

On Monday, the PBOC announced that the rate on one-year policy loans, known as the medium-term lending facility (MLF), will remain at 2.5%.

This decision aligns with the forecasts of a Bloomberg survey, reflecting the bank’s priority to maintain financial stability amid a fragile economic recovery.

The central bank also took measures to manage liquidity, withdrawing a net 55 billion yuan ($7.6 billion) from the banking system.

This action aims to prevent excessive liquidity, which could lead to further depreciation of the yuan. By maintaining a cautious stance on monetary easing, the PBOC underscores its focus on currency stability over lowering borrowing costs.

This move comes as China grapples with mixed economic signals. While exports exceeded expectations in May, inflation rose less than anticipated, and factory activity saw an unexpected contraction according to an official survey.

Despite these challenges, the PBOC’s restraint reflects a strategic choice to prioritize the strength of the yuan, even as calls for a rate cut grow louder.

Last week, the onshore yuan weakened to its lowest level since November, driven by a wide interest rate gap between the US and China.

The PBOC’s decision to hold rates steady is seen as an effort to prevent further devaluation of the yuan, which remains a “powerful currency” according to financial authorities.

Sufficient market liquidity has also influenced the central bank’s decision to refrain from outright rate cuts.

This is evidenced by the declining borrowing costs of popular debt instruments, such as one-year AAA-rated negotiable certificates of deposits, which have dropped to around 2%, compared to the MLF’s 2.5%.

The influx of funds from savings to wealth management products and other higher-yielding assets has bolstered the financial system’s liquidity, allowing the PBOC to adopt a more conservative stance.

China’s economy has experienced a patchy recovery, with government bond sales accelerating to boost infrastructure spending amidst a prolonged property slump.

Despite these efforts, the central bank remains cautious, opting for stability over aggressive monetary easing.

Commercial and merchant banks across the country have adjusted their lending rates in response to the Central Bank of Nigeria’s (CBN) recent decision to raise the Monetary Policy Rate (MPR).

This move comes as a direct reaction to the CBN’s efforts to curb inflation and stabilize the economy.

Effective May 2024, the MPR saw a substantial increase of 750 basis points, bringing it to 26.25 percent, up from 18.75 percent in July 2023.

This significant hike has prompted a wave of rate adjustments across 25 out of 31 lending financial institutions, which now offer maximum borrowing interest rates above the MPR for various sectors of the economy.

Conversely, six lenders provide loans at rates below the benchmark interest rate.

Access Bank, for instance, has set its maximum lending rate at 28.50 percent for customers in agriculture, forestry, and manufacturing, while prime customers can borrow at 22 percent.

Citi Bank offers similar maximum interest rates of 28 percent for the same sectors, with a 21.50 percent rate for prime borrowers.

Coronation Merchant Bank presents one of the highest rates, with loans available at 30 percent for both prime and maximum customers, though it offers a lower rate of 9 percent to prime customers in mining, quarrying, and manufacturing.

Ecobank has adjusted its maximum lending rate to 30 percent, while its prime rate is 26.75 percent.

The highest lending rates are observed at Stanbic IBTC Bank, where maximum rates reach up to 50 percent, though prime rates vary between 8 percent and 27 percent.

Meanwhile, FCMB offers loans at a maximum rate of 40 percent and a prime rate of 22.50 percent, reflecting the wide range of adjustments made by different financial institutions.

FBN Quest Merchant Bank and Unity Bank provide more moderate rates for specific sectors. FBN Quest offers a 9 percent rate to prime customers in agriculture and forestry, with a maximum rate of 30 percent in the manufacturing sector.

Unity Bank, on the other hand, has lending rates ranging from 9 percent to 30 percent, with a maximum rate of 38 percent.

The adjustments in lending rates are not limited to these institutions. Fidelity Bank, for example, now offers loans at 27 percent for its prime customers, with a maximum rate of 30 percent, while First Bank of Nigeria has set its lending rate at 25 percent for prime customers, and 32 percent at the maximum.

However, prime customers in the manufacturing sector can secure loans at a lower rate of 15 percent.

These rate changes reflect the broader strategy of Nigerian banks to align with the CBN’s monetary policy, ensuring they manage their lending portfolios effectively amid economic fluctuations.

The adjustment in lending rates is expected to have widespread implications for borrowers across various sectors, influencing borrowing costs and potentially impacting economic activities.

As the financial services sector adapts to the new MPR, stakeholders and analysts will closely monitor the effects of these changes on the economy.