Nigeria is poised to receive two new loans from the World Bank, totaling $580 million, with anticipated approval in March 2025. These loans are earmarked for crucial human capital development projects focused on improving nutrition and education. The larger of the two loans, a substantial $552.18 million commitment for the HOPE for Quality Basic Education for All program, aims to address Nigeria’s significant education deficit, with over 17 million children currently out of school. This funding will support enhancements in early childhood education, primary and junior secondary schooling, and expand access to vital learning resources. Currently in the concept review phase, this project requires further consultation before finalization and implementation, which will be a collaborative effort between the Federal Ministry of Finance, the Federal Ministry of Education, and the Universal Basic Education Commission.
The second loan, amounting to $80 million, targets the Accelerating Nutrition Results in Nigeria 2.0 project, designed to combat malnutrition and food insecurity, particularly among vulnerable populations such as pregnant women, lactating mothers, adolescent girls, and children under five. This project builds on a previous $232 million loan approved in 2018, which encountered challenges leading to modifications and cancellations. The current iteration, further along in the approval process and currently at the decision meeting stage, will focus on improving access to quality nutrition services through primary healthcare facilities and community-based programs. It will also incorporate nutrition-sensitive agriculture initiatives to enhance household food security and dietary diversity. A portion of the funding will also be allocated to project management, government coordination, and data-driven decision-making for sustained impact.
While these loans aim to bolster critical areas of human development, they also contribute to Nigeria’s growing debt burden, raising concerns among economists about the government’s borrowing strategy. Under President Bola Tinubu’s administration, Nigeria has secured approximately $6.95 billion in loans from the World Bank within the last 18 months, encompassing at least ten different projects. This reliance on external borrowing raises questions about long-term fiscal sustainability and the potential impact on future budgets. The World Bank’s share of Nigeria’s total external debt currently stands at $17.32 billion, with the majority owed to the International Development Association.
The increasing debt burden is further compounded by rising global interest rates. Nigeria spent $3.58 billion servicing its foreign debt in the first nine months of 2024, a significant increase compared to the same period in 2023. This rise in debt servicing costs strains the country’s fiscal balance and limits resources available for essential social programs. The global trend of rising interest rates, as highlighted by the World Bank’s International Debt Report, further exacerbates the challenges faced by developing nations, requiring significant portions of their budgets to be allocated to debt servicing, potentially diverting funds from critical sectors such as health, education, and environmental initiatives.
In response to these concerns, the Federal Government, through Finance Minister Wale Edun, has emphasized a commitment to reducing reliance on external debt and promoting private sector-led growth. The government aims to create a business-friendly environment to attract sustainable investments and explore alternative financing models beyond traditional multilateral loans. This strategy emphasizes fiscal responsibility and aims to mobilize private capital for economic expansion and job creation. The World Bank has expressed support for Nigeria’s macroeconomic reforms, acknowledging their contribution to fiscal stability and improved investor confidence.
Despite the government’s commitment to reducing reliance on external borrowing, the current trajectory suggests a continued reliance on loans for development projects. The two upcoming loans for education and nutrition, while addressing critical needs, underscore the ongoing challenge of balancing immediate development requirements with long-term fiscal sustainability. The government’s stated commitment to fostering a private sector-led growth model and exploring alternative financing options will be crucial in navigating this delicate balance and ensuring that the benefits of these loans outweigh the potential risks associated with a growing debt burden.
