Nigeria, alongside other developing countries spent $443.5 billion to service public debt amid surge in interest rate, according to the World Bank.
The multilateral lender revealed this this in its recent International Debt Report for 2023, a longstanding annual publication featuring external debt statistics and analysis for the 122 low and middle-income countries that report to the World Bank Debt Reporting System.
“Amid the biggest surge in global interest rates in four decades, developing countries spent a record $443.5bn to service their external public and publicly guaranteed debt in 2022,” the World Bank said.
The Washington-based global lender stated that the rise in borrowing costs had diverted scarce resources away from critical needs such as education, health, and the environment.
“Debt-service payments which include principal and interest increased by five per cent over the previous year for all developing countries.
The 75 countries eligible to borrow from the World Bank’s International Development Association which supports the poorest countries paid a record $88.9bn in debt-servicing costs in 2022,” World Bank said.
World Bank stated that over the past decade, interest payments by these countries have quadrupled, to an all-time high of $23.6 billion in 2022.
“Overall debt-servicing costs for the 24 poorest countries are expected to balloon in 2023 and 2024 by as much as 39 percent,” it said.
The Bretton Woods Institution stated that rising interest rates had made all developing nations more vulnerable to debt.
“There have been more sovereign defaults in the last three years than in the entire preceding two decades, affecting ten developing nations,” it said, adding that approximately 60 percent of low-income nations are currently in or at high risk of entering debt distress.
The World Bank said the stronger US dollar is adding to their difficulties, making it even more expensive for countries to make payments.
“Under the circumstances, a further rise in interest rates or a sharp drop in export earnings could push them over the edge,” World Bank said.
The Washington-based global lender said Nigeria and Tanzania were the top recipients of new financing from the World Bank in 2022 at $2.9 billion and $2.7 billion respectively.
“Total new commitments (from all types of creditors, including official and private) to Public and publicly guaranteed sector entities in International Development Association-eligible countries totaled $67 billion in 2022, a 30 percent decrease from the all-time high in 2021,’ it said.
The World Bank stated that this drop was primarily due to the decline in commitments from private sector creditors, which fell 72 percent to $9.7 billion.
“New commitments to International Development Association eligible countries from bilateral creditors also decreased by 30 percent to $14.2 billion. By contrast, new commitments from multilateral creditors increased by 4 percent to $43 billion,” it said.
The Washington-based global lender stated that new commitments by the World Bank (including IBRD and IDA lending) accounted for 58 percent of total multilateral creditor commitments, increasing by 8 percent in 2022 to an all-time high of $25.2 billion.
The World Bank said in 2022, the Bank of Industry of Nigeria, an official development bank, issued a $700 million Eurobond with a sovereign guarantee, which marked the institution’s first Eurobond issuance as well as the first provision of a Eurobond guarantee by the Federal Government of Nigeria.