After World Bank facility, Tinubu eyes new loan, debt hits N88.6trn

NIGERIANS may not have seen the end of a ballooning public debt as President Bola Tinubu plans to enter the debt market in January 2024 in search of a loan to solve numerous challenges facing the country, notably rising petrol subsidy payments, infrastructure gaps and security problems.

Tinubu is targeting another World Bank zero-interest facility, sources said.

Much of the loan will be used to fund the budget and petrol subsidy. The amount to be sought will depend on several factors, including the projected budget deficit, subsidy amount and the level of insecurity by end of the year, reliable sources said.

“President Tinubu will seek a loan by early next year. After the passage of the budget by the National Assembly, things will become clearer,” a source said.

Sources close to the Ministry of Finance told Economy Post that the returned subsidy payments had become a thorn in the flesh of the Tinubu government and would require at least N135 billion monthly or N1.62 trillion annually to fix.

This is because the Federal Government pays at least N100 on a litre of petrol as subsidy and does so on 45 million litres or more consumed everyday by Nigerians.

In August 2023, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) put the average daily petrol consumption at 48.43 million litres. However, industry players told Economy Post it had been moderating between 45 million and 47 million litres since then.

READ ALSO: Kalu Aja to Tinubu: Give families cash to spend, waive taxes, import food

Even though the government is yet to disclose the details of the subsidy or freeze on fuel price, the rising petrol price in the global market (given the Middle East crisis) means that the Federal Government will pay more in subsidies in days to come in order to alleviate the plight of Nigerians and rein in inflation (for which rising energy prices play a big part).

Rising insecurity

Rising insecurity across the country is giving the Tinubu administration a lot of concern and sources said the government was planning to make bigger financial commitments to fight it in 2024. Economy Post was told by officials of the Ministry of Agriculture that the Tinubu administration was worried about the impact of insecurity on food prices as well as the failure of its recently declared state of emergency on food.

Daily Trust reported on October 16 that Boko Haram killed 262 persons in Borno State in August and 10 farmers in 10 days in September. Twenty-one persons were killed in Plateau State on August 10, according to Vanguard, with several people mowed down by terrorists in September and October in the state.

In the 2023 budget, the Ministry of Defence got N1.384 billion, while the Ministry of Police Affairs was allocated the sum of N838.058 billion. The National Security Adviser got N242.939 billion, with the Ministry of Interior receiving N15.744 billion. Total budget for all the security agencies in 2023 stood at N2.491 trillion.

However, this is 15.6 percent less that the total security budget of 2022, which stood at N2.953 trillion. Nevertheless, the budget for security is lowest in 2021 when a total of N1.869 trillion was allocated for all the five offices listed on the table.

The amount is set to rise in the 2024 budget as Tinubu plans to reduce the level of insecurity in the country and rein in food inflation, which hit 30.64 percent in September from 29.34 percent in August 2023.

READ ALSO: Wema Bank enjoys CBN salary bailout despite 239% rise in profits

Rising Public Debt and $1.5bn loan

Nigeria’s public debt has nearly tripled between December 2020 and October 2023. As at December 2020, the public debt stood at N32.915 trillion, but this rose to N87.379 trillion by June 2023.

With the recently secured $1.5 billion loan from the World Bank, publc debt has moved to N88.6 trillion.

On October 16, Finance Minister, Mr Wale Edun, disclosed that President Tinubu had secured a $1.5 billion loan from the World Bank.

“Nigeria has been able to make the kind of macro-economic moves to take the tough decisions to restore balance in the economy in the government’s finances that have warranted support.

“This had engendered support from the multilateral development banks.

“It is on this basis that the World Bank is willing to consider and to process on our behalf $1.5 billion of concessional financing, relatively cheap financing and financing that will be dispersed relatively quickly,’’ Edun said, as reported by Vanguard.

READ ALSO: Knocks as Zenith Bank grants N3.5bn loans to mgt staff at 4% interest rate

Debt not bad but proper application matters

Experts have said that borrowing is not bad but its application matters. An economist, Dr Matthew Awo, said the Tinubu government must deviate from debt problems witnessed under the administration of former President Buhari.

“This administration must put the money borrowed to proper use. The past administration started rail projects, but some loans were used for recurrent expenditure. Tinubu must not allow that to happen and must deploy debts to improve the lives of the citizens.”

A financial expert, Mr Kalu Aja, told Economy Post that there was still room for debt in so far as the government had a plan on how to use it.

“There are many things they can do to raise money. There are asset sales, and they may even borrow. There is also cutting down of expenditures, but they need to get a plan on the table, communicate that plan and move with speed,” he said.

President Tinubu’s spokesman, Mr Ajuri Ngelale, did not respond to questions relating to the loan.

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