World Bank report shows that Nigeria is one of the top 10 countries with high debt risk exposure

NIGERIA is among the top 10 countries on earth with high debt risk exposure that could have dire consequences for her economy in the future according to a recent report just published by the World Bank.

In the recently-published financial statement from the International Development Association (IDA), Nigeria was rated fifth on the list with $11.7bn IDA debt stock, while India led the list with $22bn IDA debt stock, followed by Bangladesh with $18.1bn IDA debt stock. Pakistan followed with $16.4bn IDA debt stock and Vietnam has $14.1bn IDA debt stock.

An IDA spokesman said: “IDA faces two types of credit risk, country credit risk and counterparty credit risk. Country credit risk is the risk of loss due to a country not meeting its contractual obligations and counter-party credit risk is the risk of loss attributable to a counterparty not honouring its contractual obligations.

“IDA is exposed to commercial as well as non-commercial counterparty credit risk. As of June 30, 2021, the 10 countries with the highest exposures accounted for 66% of IDA’s total exposure.”

Other countries on the list in order of appearance included Ethiopia with $11.2bn IDA debt stock, Kenya with $10.2bn IDA debt stock, Tanzania with $8.3bn IDA debt stock, Ghana with $5.6bn IDA debt stock and Uganda with $4.4bn IDA debt stock. It added that there was a single borrower limit for IDA, which for the 2022 financial year, had been set at $45bn or 25% of $180.9bn of equity as of June 30, 2021.

It was further discovered that Nigeria’s undisbursed balance with the World Bank is about $8.656bn as at June 30, 2021. According to the financial statement from the International Bank for Reconstruction and Development (IBRD), Nigeria has a total $589m undisbursed balance, consisting of $500m loans approved but not yet signed and $89m signed loan commitment.

Also, the IDA financial statement disclosed that Nigeria had a total undisbursed balance of $8.07bn, consisting of $1.462bn loans approved but not yet signed and $6.61bn signed loan commitment. According to the IBRD, although certain amount of loans has been agreed they are not effective and disbursements do not start until the borrowers and/or guarantors take certain actions and furnish documents.

A total of $1bn loans were agreed between Nigeria and the World bank’s IBRD, of which Nigeria’s outstanding loan is $411m. For IDA, a total of $19.54bn loans were agreed upon, of which Nigeria’s outstanding loan is $11.47bn.

According to Nigeria's Debt Management Office, the country owes the World Bank a total of $11.51bn, consisting of $11.10bn IDA loans and $410.23m IBRD loans as of March 31. According to the World Bank's audited financial statements, its commitments rose to $84.3bn in the 2021 fiscal year, 15% higher than in 2020.

World Bank Group president, David Malpass, said: “The World Bank Group support to client countries surged to $157bn over the last 15 months to address increased poverty, inequality, and the impacts of Covid-19. This unprecedented level of commitments helped countries strengthen health systems, protect the poor and vulnerable, support jobs and businesses, promote economic growth, and lay the foundation for a green, resilient and inclusive recovery."