Why Nigeria is borrowing $5billion from the World Bank

The recent move by the federal government of Nigeria to borrow five billion dollars from the World Bank has been met with strong criticism by citizens who do not believe such loan is not needed at this point in time.

President Muhammadu Buhari’s government on its part defends the need to borrow as critical to the development of the nation’s infrastructure and to stimulate the economy.

For many Nigerians, this could yet lead into another debt-trap as it has been seen in years gone by and they’re wondering why the country is always borrowing.

Below are five reasons for Nigeria’s perpetual borrowing.

Cost of living:

In spite of the country’s vast oil wealth, the majority of Nigerians are poor with 71 per cent of the population living on less than one dollar a day.

Transportation, education systems, health services and associated amenities are at a very low ebb.

Overpopulation:

The country has been undergoing explosive population growth and has one of the highest growth and fertility rates in the world. By UN estimates, Nigeria will be one of the countries responsible for most of the world’s total population increase by 2050.

Expenditure exceeds revenue:

Where expenditures exceed revenue, governments will need to borrow. In doing so, the Federal Government is trying to balance its portfolio towards more external borrowing with lower interest rates.

Mismanagement of excess crude account:

Federal government has for many years maintained an Excess Crude Account but the three arms of government divide the fund among themselves; the funds is in deficit, Government may be trying to borrow to cover this management

Lack of faith in FIRS, Customs revenue streams:

The Nigeria Customs Service has generated N898 billion as revenue in 2016, including VAT, while the Federal Inland Revenue Service, FIRS, had collected N1.782 trillion as tax between January and July 2017. Despite these huge sums, the Nigerian state still competes with failed economies in providing social amenities.