- Nigeria to Borrow Another $3b from World Bank
Despite Nigeria’s debt hitting N25.7 trillion in the first half of the year, the Federal Government has approached the World Bank for a fresh $3 billion loan, according to the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed.
The minister disclosed this on the sidelines of the World Bank/International Monetary Fund meetings in Washington DC, United States.
According to the minister, the new loan would be used to finance the Nigerian struggling power sector.
While Ahmed agrees that rising Nigeria’s debt amid weak revenue generation remains a challenge to the nation’s rising debt obligations, she also said Nigeria does not have a debt problem. Meaning, the nation issue has always been weak revenue growth.
In spite of President Muhammadu Buhari’s push for diversification and infrastructure development, Nigeria’s revenue remains unimpressive across the board.
The Debt Management Office said the nation’s debt rose to N25.7 trillion in the first half of the year. If the World Bank approved the new loan application, Nigeria’s debt could hit N28 trillion by December.
A situation that has prompted the International Monetary Fund to suggest a tax increase in Africa’s largest economy.
The Assistant Director, Fiscal Affairs Department, IMF, Mrs. Cathy Pattillo, said the size of Nigeria’s interest payment to revenue is the issue.
“On Nigeria, the priority is a comprehensive reform to increase non-oil tax and there are a number of reasons this will contribute to creating space for important spending in infrastructure and human development spending.
“For Nigeria, this is very important for a number of reasons. One, because right now, interests payment as share of tax are very high around a third of overall and two-thirds for the Federal Government.
“And that is because interest payments are particularly high because the denominator is incredibly low. Nigeria has one the lowest tax ratio in the world and it is not because Nigeria doesn’t have big development problems but because the challenge is that Nigeria has a lot of needs for education and health spending.”