The Federal Government has approached the World Bank for a fresh loan of $400m for the conditional cash transfer to 15 million households as one of the measures to cushion the effects of petrol subsidy removal on Nigerians.
The $400m will bring to $1.2bn the amount that the Federal Government is borrowing from the World Bank for the cash transfer as it had earlier secured a loan of $800m for the same purpose.
President Bola Tinubu announced the conditional cash transfer to 15 million households in a nationwide address to commemorate the country’s independence on October 1 as part of measures to cushion the effects of the subsidy removal on petrol, which has led to an astronomic rise in the cost of living.
He also announced that the Federal Government would commence the payment of N25,000 monthly to 15 million households for three months from October to December 2023.
The immediate past administration of President Muhammadu Buhari had secured $800m from the International Bank for Reconstruction and Development (World Bank) to provide post-petroleum subsidy palliatives for over 50 million Nigerians. The loan was meant to be accessed by the succeeding administration.
In his October 1 broadcast, President Tinubu also announced the approval of N25,000 provisional allowance for junior federal workers over the next six months.
He said the approval followed negotiations with labour unions and other stakeholders in the business community to increase the federal minimum wage without triggering undue inflation.
“For the next six months, the average low-grade worker shall receive an additional N25,000 per month,” the President stated.
However, following protests about the exclusion of other categories of workers and pensioners and the threat by the organised labour to embark on a nationwide strike, the government announced N35,000 provisional wage award for all treasury-paid Federal Government workers for six months following further consultations with the leadership of the Nigeria Labour Congress and the Trade Union Congress.
A top government official, who spoke on condition of anonymity because of the sensitive nature of the issue, told Sunday PUNCH that the Tinubu administration would fund the N35,000 cash award to civil servants by sending a supplementary appropriation bill to the National Assembly.
The source stated, “The government is funding the N35,000 wage increase for all federal civil servants and it is not taking a loan. The one the government is taking a loan for is the one of N25,000 multiplied by three months for 15 million households. There is a loan of $800m on this one and the government is adding $400m, making it $1.2bn, which will be used for the conditional cash transfer.
“But, the other one (cash award to federal civil servants), the government will fund it. So, most likely there will be a supplementary appropriation for that because it is illegal to spend money out of the government budget.”
Meanwhile, Nigeria has maintained its fourth position on the World Bank’s top 10 International Development Association borrowers’ list.
This was after moving up from fifth position in the 2022 fiscal year.
Despite maintaining its fourth position, the country accumulated about $1.3bn debt within a one-year period.
The World Bank Fiscal Year 2022 audited financial statement showed that Nigeria moved to the fourth position on the list with $13bn IDA debt stock as of June 30, 2022.
However, the World Bank Fiscal Year 2023 audited financial statement showed that Nigeria owed about $14.3bn IDA debt stock as of June 30, 2023, but maintained its fourth position on the list.
Sunday PUNCH further observed that Bangladesh ($19.3bn) moved up the list to become the topmost IDA debtor, taking over from India ($17.9bn debt), which fell to the second position.
Pakistan maintained the third position from the last fiscal year with a debt of $16.9bn.
Nigeria has the highest IDA debt in Africa, while the top three borrowers, Bangladesh, India, and Pakistan, are from Asia.
Also, in the World Bank 2023 Annual Report, Nigeria was among the top 10 countries that acquired fresh IDA loans this year.
The report showed that the bank committed $1.55bn to Nigeria in the fiscal year of 2023, with the country recognised as the ninth-highest beneficiary.
Sunday PUNCH recently reported that the Federal Government was engaging the World Bank on a fresh $1.5bn loan.
The loan is titled ‘Nigeria Human Capital for Opportunities and Empowerment’ based on information obtained from the website of the Washington-based bank.
The objective of the loan is “to strengthen systems for improved delivery of basic education and primary health services in participating states.”
The loan is meant to be implemented in 2024, pending approval by the board of the World Bank Group.
The International Bank for Reconstruction and Development and the International Development Association, which make up the World Bank, have over the years advanced loans to Nigeria.
The IBRD lends to governments of middle-income and creditworthy low-income countries, while the IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.
The World Bank is Nigeria’s biggest multilateral creditor, with the country owing about $14.51bn as of June 30, 2023.
Further breakdown showed that Nigeria had $14.03bn IDA debt and $485.75m IBRD debt by the second quarter of 2023.
The Debt Management Office recently said the country’s total public debt hit N87.38tn at the end of the second quarter of this year.
The figure represents an increase of 75.29 per cent or N37.53tn compared to N49.85tn recorded at the end of March 2023.
Further breakdown shows that Nigeria has a total domestic debt of N54.13tn and a total external debt of N33.25tn.
While the domestic debt makes up 61.95 per cent of the total debt, the external makes up 38.05 per cent.
It was also observed that there was a significant increase in both domestic and external debt within three months.
The domestic debt rose by 79.18 per cent from N30.21tn while the external debt rose by 69.28 per cent from N19.64tn in Q1 2023.
In its 2022 Debt Sustainability Analysis Report, the DMO warned that the Federal Government’s projected revenue of N10tn for 2023 could not support fresh borrowings.
According to the office, the projected government’s debt service-to-revenue ratio of 73.5 per cent is high and a threat to debt sustainability.
It noted that the government’s current revenue profile could not support higher levels of borrowing.
In a report titled, ‘Report of the Annual National Market Access Country Debt Sustainability Analysis,’ the debt office said, “The projected FGN debt service-to-revenue ratio at 73.5 per cent for 2023 is high and a threat to debt sustainability.
“It means that the revenue profile cannot support higher levels of borrowing. Attaining a sustainable FGN debt service-to-revenue ratio would require an increase of FGN revenue from N10.49tn projected in the 2023 budget to about N15.5tn.”
The DMO stated that the government must pay attention to revenue generation by implementing far-reaching revenue mobilisation initiatives and reforms, including the Strategic Revenue Growth Initiatives and all its pillars with a view to raising the country’s tax revenue to GDP ratio from about seven per cent to that of its peer.
The Federal Government would be unable to borrow a lot as it nears its self-imposed debt limit of 40 per cent, the DMO said.
To reduce borrowing and budget deficit, it stated that the government should encourage the private sector to fund some of the capital projects that were being financed from borrowing through the public-private partnership schemes.
It added that the Federal Government could reduce borrowing through the privatisation and/or sale of government assets.
