IMF, World Bank and Nigeria’s Huge Debt
By Wale Odunsi
The 2024 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) took place from October 21 to October 26 in Washington, D.C., the United States capital. As usual, it was a forum for senior government officials, experts, delegates, observers, civil society groups, and guests from around the world to interact and share perspectives on climate, finance, poverty reduction, economic development, and other crucial global concerns.
Ahead of the gathering, debt reduction for certain countries made headlines as advocates and organizations pushed for relief. For Nigeria, the 6th most populous country, the arguments with regard to its humongous debt come about daily as many cannot fathom why a sovereign state with stupendous wealth needs numerous loans. The outstanding payments are regularly a subject of debate – sometimes heated.
In the course of discussions at homes, bars, bus stops, schools, markets, newspaper stands, religious centers and even social events, citizens ponder the essence of loans they say have little or no direct impact on their lives. On one hand, critics lambast successive governments for routine borrowings, which could have been lessened if there was a tight rein on profligacy. They are confused as to why Africa’s biggest nation wallows in a situation that seems almost impossible to get out of.
On the other hand, the proponents of government policies point to the reasons Nigeria needs unlimited financial support, especially for infrastructure development. They opine that with over 220 million people, soliciting loans shouldn’t generate fuss. “After all, big economies borrow too” is the typical assertion. But how many countries can boast of Nigeria’s resources? Petroleum, natural gas, tin, limestone, niobium, coal, iron ore, bentonite, baryte, talc, gypsum, lead, zinc, bitumen, solar energy, arable land, et cetera.
Apart from the IMF and the World Bank, Nigeria has several other allies: African Development Bank (AfDB), Bill & Melinda Gates Foundation, European Union (EU), Canadian International Development Agency (CIDA), French Development Agency (AFD), German Agency for International Development (GIZ), International Finance Corporation (IFC), Islamic Development Bank, Japan International Cooperation Agency (JICA), UK Department for International Development (DfID), United Nations Development Programme (UNDP), United States Agency for International Development (USAID), and the rest.
It is a mystery of sorts that even with a staggering list of development partners who also provide grants and loans, Nigeria is now the third-largest debtor to the World Bank’s International Development Association (IDA), which comprises 175 member countries. With low interest rates and lengthened repayment timeframes, the IDA provides concessional loans and grants to poor nations to help them grow their economy, prepare for/manage crises, improve living conditions, and diminish inequalities.
As if not enough aberration that Nigeria has caused itself to be placed in the “poor” league, the nation now owes the World Bank $16.5 billion (as of June 2024), up by $2.2 billion as against $14.3 billion at the end of last year. Others on the top three IDA debt list are Bangladesh, $20.5 billion, and Pakistan, $17.5 billion. Since President Bola Tinubu assumed office in May 2023, Nigeria has borrowed $6.45 billion, and it is not unexpected that another round of borrowing will resume in 2025.
While the debts continue to accumulate, the citizens are grappling with economic reforms such as the removal of subsidies on petroleum products and the floating of the naira in the foreign exchange market. Inflation rate, now at 32%, has got the majority in a chokehold as the prices of premium motor spirit (petrol), which varies according to locations, has jerked up the costs of food items, transportation, and other goods and services, despite meagre salaries, income, and savings.
Therefore, it was not surprising that the recent comment by World Bank Vice President Indermit Gill prompted outrage. On October 14, exactly one to the start of the 2024 Annual Meetings, Gill advised the Nigerian government to sustain the reforms that have further impoverished the struggling commoners. “There is no shortcut to economic transformation. Nigeria must stay the course for another 10 to 15 years of focused reforms,” he said.
The widespread condemnation is perfectly understandable, but Nigerians need to consider Gill’s counsel as a case of “he who pays the piper calls the tune.” In other words, don’t collect the money if you don’t want anyone to throw their weight around you. Notwithstanding, we must keep in mind that the Bretton Woods Institutions have made interventions in a number of countries where reasonable successes have been recorded.
I think the bulk of Nigerians’ resentment should be towards former and serving office holders who, again and again, go cap in hand to make requisition for money in spite of a vast oil wealth which spans decades. A Yoruba adage says, “A kii fa ori lehin olori,” meaning “It is not done to shave a man’s head without him being present.” Suffice to say, the billions of dollars Nigeria has taken were willingly assented to by its officials, not at gunpoint.
The honest truth: the IMF and World Bank do not enjoy a great deal of positive reviews from Nigerians who believe they are not doing enough to hold the government to account. Both institutions are invited to take a survey on this fact. In June 2023, the World Bank’s Nigeria Development Update (NDU), titled “Seizing the Opportunity”, advised the then new administration to implement a comprehensive package, including a new social compact that would protect the poor and most vulnerable from major reforms.
The report, issued days after President Tinubu declared “subsidy is gone” in his inauguration speech, reads in part: “Compensating transfers will be essential in helping to shield Nigerian households from the initial price impacts of the subsidy reform. Without compensation, many households could be pushed into poverty by higher petrol prices and forced to resort to coping mechanisms with long-term adverse consequences, such as not sending children to school, or not going to health facilities to seek preventative healthcare.” The World Bank should study what has happened to the above recommendation and publish its findings.
Even the IMF is concerned that a chunk of Nigeria’s revenue is used to service debt, thereby reducing funds for critical development projects. At the 2024 Annual Meetings, Davide Furceri, Division Chief, Fiscal Affairs Department, said the debt service-to-revenue ratio stands at about 60 percent. In his submission, the official stressed that if countries like Nigeria can improve their revenue mobilization, “they will be able to reduce the portion of the revenue that goes into debt servicing.”
Furceri noted, “It is important to broaden the tax base in order to have more revenue,” and urged Nigeria to “put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.” It is apt to point out that the Tinubu administration had attempted to review the tax regime but backtracked after rife objections by the citizenry who have questions about the whereabouts of the billions of naira generated annually from oil sales, imports, mining, among others.
In his article “Engineering economic recovery in Nigeria,” Prof. Eghosa Osagie, ex-Director of Research, National Institute for Policy and Strategic Studies (NIPSS), knocked successive governments for dancing to the tune of foreign governments/multilateral institutions: “Policy advice is accepted by leaders over the more appropriate policy recommendations of Nigerian economists who take into consideration the peculiarities of the Nigerian economy.” The scholar cited governments who – though consult international financial institutions – always take decisions based on rigorous economic analysis of their economists.
For Nigeria to get out its debt quagmire, first, corruption must be tackled with genuine political will. No sacred cows. To date, there are people bragging about being untouchable because of their closeness with the highest echelons. The judiciary should stop prolonged adjournments, which allows corruption cases to drag on for many years, while the Economic and Financial Crimes Commission (EFCC) should scrap “plea bargain.” Public funds are diverted with the mindset of “I’ll get a slap on the wrist/lesser time in prison after returning part of the loot.”
Second, the cost of governance in Nigeria is ridiculously high. “Bigmanism” is deeply rooted in the system to the extent that officials consider it compulsory to go about in large convoys. The majority of the population feeds with less than a dollar (N1,700) per day, but those in government drive pass them in the latest vehicles in the range of N100 million – N250 million. Of course, they have multiple in their fleet, some bulletproof, or have special features that add to the total cost per unit.
A few weeks ago, the President had to dispatch order barring officials from using more than three vehicles. Supposing this is enforceable at the federal level, who will stop State Governors, Deputies, and their spouses from having dozens of vehicles? The extravagant lifestyle of some governors is on another level; we’ve seen/heard it all. Instances of paying kids’ school fees till 2031!; celebrating a weeklong birthday party in the Caribbean; driving a 2025 armored car in 2024; acquiring assets for family members, and so forth.
Third, the executive and legislative arms must block the economic leakages that crooked officials used/use to siphon funds. One of the ways is a thorough scrutiny of capital and recurrent spending. The Nigerian media has been exposing irregular insertions into the budgets of ministries, departments, and agencies (MDAs) but can not do more than that. Journalists and activists can only play a supervisory role, but the prosecutorial powers lie with law enforcement establishments. In the 2024 budget, a parastatal earmarked N5 billion to purchase vehicles for traditional rulers. Read that again.
Fourth, illegal mining has cost Nigeria billions of naira; hence, the fight against this malfeasance should be conducted with full force, including raids, arrests, and prosecution of offenders. In July, the government confirmed that the country currently has 44 globally sought-after mineral resources. With strict surveillance and additional investments, there will be more job opportunities and revenue. Moreover, tourism can boost international capital flows, but this largely depends on the adequate security of lives and property of locals and foreigners.
Nigerians absolutely desire proactiveness, not last-minute actions, as witnessed before the protests in August when a discounted price for rice was announced. As part of efforts to dissuade the public demonstration, the federal government said bags of rice would be sold at N40,000 at designated centers/markets. Should a government wait till the eve of a protest before offering an extra palliative? One must not fail to recall the stampede, which resulted in injuries and deaths on February 23, 2024, during the uncoordinated rice distribution at the Nigeria Customs Service (NCS) zonal headquarters in Yaba, Lagos. God rest their souls.
To sum up, living in opulence, buying new planes, cruising in high-end automobiles, and having sumptuous meals at the behest, while appealing to millions of others to “make sacrifices” or “bear the pains” is unfair. The masses have endured sufferings; asking them to continue to do so can be likened to quietus advisory. Nigerian leaders should stop taking the people for granted. A man who can no longer bear pains will one day fight back and be ready to go to glory in the process. The authorities and politicians must not wait for such a desperate moment.
Wale Odunsi, a Nigerian journalist & humanitarian, writes from [email protected]_
