Precious Nwonu, Enugu

The Federal Government has challenged the World Bank’s assessment of Nigeria’s debt burden, arguing that reports suggesting interest payments exceeded government revenue in the first half of 2026 were based on an incomplete fiscal picture.

The Federal Ministry of Finance said the reported N7.7tn interest payments, equivalent to about 124 per cent of the N6.2tn revenue recorded during the period, did not accurately reflect the government’s debt position.

The ministry stated its position in a statement issued on Sunday and shared on X by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.

The response followed public discussions surrounding the World Bank’s October 2026 Nigeria Development Update, which reported Federal Government revenue of N6.2tn and interest payments of N7.7tn between January and June 2026.

An analysis of the published figures showed that interest payments exceeded revenue by N1.5tn, representing approximately 124.2 per cent of revenue. The ratio was calculated from the figures in the report rather than expressly stated by the World Bank.

However, the ministry argued that the calculation was misleading for three reasons, including the inclusion of debt obligations serviced on behalf of state governments, incomplete revenue figures and the timing of revenue collections.

According to the ministry, the interest-payment figure included external loans serviced by the Federal Government on behalf of other tiers of government.

It maintained that comparing such obligations exclusively with federal revenue inflated the ratio because debt and revenue figures should cover the same level of government.

The ministry also argued that the revenue figure excluded income generated by government agencies and enterprises but not yet remitted to the Treasury.

It added that statutory payment schedules meant some taxes were collected predominantly in the second half of the year, making the first six months an incomplete basis for evaluating annual debt obligations.

To support its position, the ministry compared the figures for the first half of 2025 with those for the corresponding period in 2026.

It said Federal Government revenue increased by 72 per cent, from N3.6tn to N6.2tn, while interest payments rose by 38 per cent, from N5.6tn to N7.7tn.

The ministry said the interest-to-revenue ratio consequently declined from 156 per cent in the first half of 2025 to approximately 124 per cent in the first half of 2026.

It also stated that the full-year debt-service-to-revenue ratio had fallen below 60 per cent, compared with 97 per cent before the current administration’s reforms.

The ministry described the figures as evidence of improved fiscal management, arguing that the gap between interest payments and revenue had narrowed from N2tn to N1.5tn.

“This is the result of reforms working, not a sign of fiscal distress,” the ministry stated.

It further rejected the use of a six-month fiscal snapshot as a definitive measure of debt sustainability, pointing instead to the World Bank’s full-year projection.

“The same World Bank report projects Nigeria’s full-year 2026 debt service, covering both interest and principal, at 46 per cent of revenue. This is the appropriate benchmark, and a guide to avoid the invalid conclusions being drawn,” the statement read.

The ministry also defended the administration’s borrowing programme, insisting that all loans obtained by the government were lawful and had received the necessary approvals.

It said borrowing complied with the limits authorised by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan.

The ministry added that the government’s borrowing activities were guided by the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003, while details of public debt were regularly published by the Debt Management Office.

However, the ministry did not provide revised revenue and interest-payment figures or an alternative ratio to support its challenge to the World Bank’s assessment.

 FG to Begin Repaying $1.25bn World Bank Loan in 2031

Meanwhile, the Federal Government is scheduled to begin repaying the principal on a $1.25bn World Bank loan in December 2031, with the final instalment on one of the facilities due in June 2060.

The financing, obtained under the Nigeria Actions for Investment and Jobs Acceleration Development Policy Financing programme, is designed to support reforms targeting access to credit, electricity supply, trade competitiveness and government revenue.

The facility comprises a $750m concessional credit from the International Development Association and a $500m loan from the International Bank for Reconstruction and Development, both members of the World Bank Group.

The loan was approved in 2026 amid concerns about Nigeria’s rising debt burden and calls for the government to limit external borrowing.

The World Bank said the financing would support Nigeria’s transition towards more inclusive economic growth, improve competitiveness and create jobs.

The reforms cover capital markets, digital services, electricity access, trade barriers, agricultural inputs and domestic revenue mobilisation.

According to the financing agreements reviewed by *The PUNCH*, principal repayments on both facilities will begin on December 15, 2031, although their repayment periods differ.

The $750m IDA credit is scheduled to be fully repaid by June 15, 2051, while the $500m IBRD loan will run until June 15, 2060.

Under the IDA agreement, Nigeria will repay 2.5 per cent of the credit every six months, amounting to $18.75m per instalment, or $37.5m annually during full repayment years.

For the IBRD facility, the government will make semi-annual principal payments of 1.72 per cent from December 2031 through December 2059, followed by a final instalment of 1.96 per cent in June 2060.

The regular IBRD instalments amount to approximately $8.6m every six months, while the final payment is about $9.8m.

Combined, the two facilities will require principal repayments of approximately $27.35m every six months between December 2031 and June 2051, equivalent to about $54.7m annually during full repayment years.

The repayment schedules will extend across several administrations, with the final principal payment on the IBRD facility due nearly 34 years after the agreements were signed.

The figures cover principal repayments only and exclude interest and other applicable charges.

Under the IBRD agreement, the interest rate is based on a reference rate plus a variable spread. The IDA credit’s interest charge is calculated using the reference rate and variable spread, less 250 basis points, subject to applicable conditions.

The IBRD loan also carries a front-end fee of 0.25 per cent, equivalent to $1.25m, and an annual commitment charge of 0.25 per cent on the undisbursed balance.

The IDA agreement provides for a maximum annual commitment charge of 0.5 per cent on the undisbursed financing balance.

The agreements do not specify a fixed dollar amount for total interest payments over the repayment period, meaning the eventual borrowing cost will depend on applicable rates and other contractual provisions.

The IDA credit is structured for disbursement in a single tranche, subject to the World Bank’s assessment of Nigeria’s economic policies and implementation of agreed reforms.

The IBRD facility is divided into two withdrawal tranches of $249.375m each, with the remaining $1.25m allocated to the front-end fee.

Release of the second tranche depends on satisfactory progress in implementing the programme, maintaining an adequate macroeconomic framework and completing agreed policy actions.

The IBRD agreement also allows the lender to cancel part or all of the undisbursed balance if the government fails to take satisfactory corrective measures within 90 days of receiving notice.

Both agreements have a closing date of December 31, 2027.

Loan Tied to Tax, Electricity and Trade Reforms

The financing agreements outline two broad reform areas: improving access to credit, digital services and electricity, and strengthening economic competitiveness through trade, taxation and agricultural measures.

Among the recognised measures are the Investment and Securities Act 2025, the National Integrated Electricity Policy, electricity metering reforms and regulations designed to encourage private investment in interconnected mini-grids.

The government also committed to implementing trade reforms under the African Continental Free Trade Area, including the gradual liberalisation of 90 per cent of tariffs on goods from African countries over 10 years.

Other measures include removing import bans on specified essential food products and inputs, reducing import adjustment taxes on selected commodities by at least 25 per cent in 2026, and progressively eliminating applicable adjustment taxes between 2027 and 2036.

In taxation, the agreements recognise the introduction of mandatory electronic invoicing for Value Added Tax, a 15 per cent minimum effective tax rate for large companies and multinational enterprises, and an increase in the maximum personal income tax rate from 24 to 25 per cent.

The financing arrangements also impose reporting and accountability requirements on Nigeria.

The government is required to maintain dedicated dollar accounts for receiving loan proceeds and ensure that equivalent amounts are reflected in its budget management system.

The Federal Ministry of Finance must report amounts received, relevant account details and transaction records to the World Bank within 30 days of each withdrawal.

The agreements further require the accounts to be audited by auditors of the Central Bank of Nigeria acceptable to the World Bank. Certified audit reports must be submitted within four months of withdrawal and made publicly available.

The World Bank’s financing is intended to support Nigeria’s economic reform programme, with disbursement subject to satisfactory implementation of the agreed measures and maintenance of an adequate macroeconomic policy framework.