Market News

The Federal Government is expected to secure another $500m facility on December 19, 2025, under the Fostering Inclusive Finance for MSMEs in Nigeria project. The operation is being prepared for Board consideration and will be implemented through the Development Bank of Nigeria.

The borrowing cycle under the administration of Bola Tinubu began with $2.7bn in loans in 2023 across four major projects. Financing that year was dominated by power sector recovery, renewable energy access, girls’ education, and women’s economic empowerment.

The Nigeria Distributed Access through Renewable Energy Scale-up project received $750m in IDA financing to expand private sector-led clean energy access. Another $700m IDA credit was approved for girls’ secondary education in participating states. Women’s economic empowerment attracted $500m IDA through the Nigeria for Women Programme Scale Up.

The AF Power Sector Recovery operation received $449m in IBRD financing and $301m in IDA to improve the reliability of the electricity supply and restore financial sustainability in the sector. There were no grant components in 2023, so the entire amount consisted of loans.

The volume of loans rose sharply in 2024 as new approvals reached $4.25bn, representing a 57.4 per cent increase compared with the preceding year. The increase was driven largely by two policy-based operations and three separate $500m IDA investment packages.

The Nigeria Reforms for Economic Stabilisation to Enable Transformation programme provided $1.5bn in loans, split between $750m IBRD and $750m IDA, as the government sought fiscal space and protection for vulnerable populations while reforms continued.

Another $750m IBRD loan was approved for the NG Accelerating Resource Mobilisation Reforms programme to boost non-oil revenues and safeguard oil and gas receipts.

The World Bank also cleared $500m IDA each for rural road access, primary healthcare strengthening, and dam safety and irrigation programmes. The primary healthcare programme included a $70m grant, which lifted total World Bank support for 2024, including grants, to about $4.32bn.

For 2025, the data shows $2.695bn in loans at various stages of project processing alongside $52.18m in grants. Nine operations have already been identified across financial inclusion, digital broadband, health, education, social protection, and institutional capacity.

The largest facilities are tied to $500m IDA each for broadband expansion, basic education, and livelihood support for poor and vulnerable households. Health security, nutrition, and internally displaced communities account for another $630m, while procurement standards receive $65m from IDA.

A $400m IBRD component is included for the MSME finance programme, along with a $100m IDA portion. Also, the Central Bank of Nigeria is to receive a $6.8m grant to strengthen technology-enabled oversight of the banking sector and deepen understanding of payment and remittance systems.

Compared with 2024, the 2025 loan pipeline represents a decline of about 36.6 per cent, though it is broadly in line with the $2.7bn reached in 2023. Across the three years, IDA loans account for about $7.30bn while IBRD loans contribute roughly $2.35bn. Grants add another $122.19m, rising from zero in 2023 to $70.01m in 2024 before easing to $52.18m in 2025.

The portfolio highlights the scale of financing underpinning Nigeria’s reform programme as authorities continue to seek low-cost multilateral resources even as concerns persist over debt sustainability and the need to strengthen domestic revenue mobilisation.

The PUNCH earlier reported that Nigeria’s stock of World Bank International Development Association loans rose to $18.5bn, making it the largest IDA borrower in Africa and the third-biggest in the world.

Fresh data from the IDA’s unaudited financial statements for the third quarter of 2025 confirmed that the country has maintained the ranking it first attained in 2024, when it climbed to third place after overtaking India. The country was the fourth-largest borrower in 2023.

According to the report, Nigeria’s exposure increased from $17.1bn in September 2024 to $18.5bn in September 2025, representing a rise of $1.4bn or 8.2 per cent. The increase reflects the country’s heavier reliance on concessional financing to plug infrastructure gaps, stabilise its reform programme, and support social spending amid volatile oil earnings.

Economists warn that the rising loan pipeline, while potentially beneficial for long-term development, could deepen fiscal pressures if not matched with stronger domestic revenue mobilisation and prudent expenditure management.

Lagos-based economist, Adewale Abimbola, reacting to the rising World Bank commitments to Nigeria, said loans from multilateral institutions such as the World Bank are largely concessionary, with interest rates typically below market levels and longer repayment tenors.

He noted that the critical question is not whether Nigeria should be borrowing, but whether the loans are structured and deployed effectively. “If it’s concessionary and tied to viable projects with medium-term revenue prospects, I don’t think it’s a bad idea,” Abimbola explained. “Borrowing isn’t bad; what matters is utilisation.”

He stressed that the economic impact of such loans depends on how well they are channelled into projects that can generate sustainable growth, strengthen revenue, and improve public services over time.

Development economist and CEO of CSA Advisory, Dr Aliyu Ilias, has expressed strong reservations about Nigeria’s rising debt profile in light of the World Bank’s fresh commitments.

While acknowledging that borrowing is not inherently bad for an economy, he questioned the rationale for taking on more debt at a time when the government claims to have higher revenues. Ilias pointed out that following the removal of fuel subsidy, Tinubu had announced increased revenue inflows.

He added that both the Federal Inland Revenue Service and the Nigeria Customs Service had declared revenue surpluses, further suggesting the government should be able to fund projects without resorting to heavy borrowing.

According to him, the impact of the current borrowing spree is being felt in reduced public service delivery, particularly in capital expenditure, as debt servicing now consumes a significant portion of available revenue.

He warned that this crowding-out effect limits job creation, fuels inflation, and worsens Nigeria’s foreign-exchange imbalance, with the naira trading at historically low levels.

He argued that given the claimed revenue surpluses, the Tinubu administration should not have needed to borrow within its first two years in office, let alone at the scale currently being witnessed.

Economist and CEO of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the rising World Bank commitments to Nigeria should be examined within the context of the country’s Medium-Term Expenditure Framework and annual budgets, which already provide for both domestic and foreign borrowing.

He noted that deficit financing is a common feature of budgets worldwide and is not inherently wrong, as it allows governments to make critical investments without waiting to generate all the required revenue upfront.

However, he stressed that borrowing should always be backed by sound economic reasoning and clear development priorities. Yusuf emphasised that the key issue is debt sustainability, which depends primarily on the country’s revenue capacity to service its obligations.

Without strong cash flow to meet repayment schedules, he warned, Nigeria risks falling into a vicious cycle of borrowing to service existing loans, thereby perpetuating fiscal vulnerability. He said it is essential that projects funded by loans directly support the economy’s capacity to repay.

According to him, Nigeria should be cautious with foreign loans due to the exchange rate risks they pose, noting that domestic debt is generally easier to manage. Excessive foreign borrowing, he warned, could put pressure on the country’s reserves and further weaken the exchange rate. He stressed that a disciplined approach to debt sustainability will be crucial for Nigeria to avoid long-term fiscal distress.

Meanwhile, data from the Debt Management Office showed Nigeria’s external debt stood at $46.98bn as of June 30, 2025. Of this amount, the World Bank Group accounted for $19.39bn—comprising $18.04bn from the International Development Association and $1.35bn from the International Bank for Reconstruction and Development.

This means the World Bank holds 41.3 per cent of the total, reinforcing its outsized role in funding Nigeria’s development programmes.

The Minister of Budget and Economic Planning, Senator Abubakar Bagudu, recently called on the World Bank to support Nigeria’s Renewed Hope Ward Development Programme, a grassroots initiative he described as central to achieving President Bola Tinubu’s target of building a $1tn economy by 2030.

The minister praised the World Bank for its consistent backing of Nigeria’s reforms, describing the last 28 months of partnership as both challenging and transformative. “The World Bank team has collaborated with us not just as partners but as members of the same team. We could not have achieved the results we have today without your support,” he said.

Speaking with the minister in August 2025, the World Bank Country Director, Matthew Verghis, commended Nigeria for making bold decisions that could reset its development trajectory.

“Nigeria’s recent decisions represent a critical moment. Such choices are not easy, but they create opportunities for a new path,” Verghis said. “The World Bank stands ready to continue supporting Nigeria in maintaining these reforms and increasing their impact.”

However, The PUNCH also reported in September 2025 that about six loans worth $2bn, signed for Nigeria by the World Bank in 2024, were yet to be disbursed nearly a year after the bank’s approval.

Responding to an enquiry by The PUNCH, the Senior External Affairs Officer at the World Bank, Mansir Nasir, noted that funds for projects financed by the institution were not disbursed at once but in instalments, depending on the nature of the project and financing instruments.

“Projects financed by the World Bank run for a certain time, which varies depending on the specific project. The total amount of the project is not disbursed as a one-off, but rather in instalments depending on the financing instruments—e.g., IPF or PforR—which require certain milestones for specific disbursement values.

“If you look at the portal, you will see the specific disbursement timelines and values,” Nasir added. He further stated that before a new project can begin disbursement, it must meet certain agreed conditions between the Federal Government and the World Bank.