Nigeria’s financial landscape is set to witness a significant shift as the country prepares to repay a $500 million loan secured from the World Bank‘s International Development Association (IDA). The loan, aimed at strengthening Nigeria’s primary healthcare system, comes with a 25-year repayment term, sparking concerns about the country’s growing external debt and rising debt servicing obligations.
According to the financing agreement obtained by our correspondent, the loan will be serviced twice a year. Instalments are due every April 15 and October 15. The repayment structure is divided into two phases. Between 2029 and 2049, Nigeria will repay the principal at a rate of 1.65% annually. After this period, the rate will increase to 3.40% from 2049 until 2054. Additionally, the loan attracts a commitment charge of 0.5% on unwithdrawn funds and a service charge of 0.75% on withdrawn balances.
The Federal Ministry of Health and Social Welfare will manage the funds. The National Primary Healthcare Development Agency will assist in the management. The National Health Insurance Authority and the Nigeria Centre for Disease Control and Prevention will also assist. State governments will participate in the implementation. They will do so through their respective Ministries of Health. Additionally, they will use their Primary Healthcare Development Boards and other agencies. The funds will be disbursed based on specific healthcare performance indicators, ensuring measurable results.
Nigeria’s growing external debt has raised concerns among economists and financial experts. The country’s external debt stock stood at $38.39 billion as of September 2024, according to the Debt Management Office (DMO). The World Bank’s $500 million loan increases this burden. It sparks worries about the country’s ability to meet its debt servicing obligations.
We spoke to Dr. Bongo Adi, a financial expert, to gain insight into the implications of Nigeria’s growing external debt. “Nigeria’s debt burden is becoming increasingly unsustainable,” Dr. Adi said. “The country needs to adopt a more strategic approach to debt management. It should prioritize concessional loans and grants. Additionally, implementing policies to boost revenue generation is crucial.”