Following the spring meeting of the World Bank and International Monetary Fund in Washington, D.C. last month, Nigeria’s Finance Minister, Wale Edun, announced the Nigerian Federal Government’s qualification for a $2.25 billion loan from the World Bank, while Nigeria’s president is under fire for potentially misappropriating more than $3 billion in emergency funding received from the IMF in 2020. The World Bank loan proposes $1.5 billion in development policy financing and $750 million in program-for-results financing.
What You Need to Know
Minister Edun’s announcement comes almost two months after a Nigerian NGO–the Socio-Economic Rights and Accountability Project (SERAP)–filed a lawsuit against President Tinubu for failing to “probe allegations that a $3.4 billion loan obtained by Nigeria from the International Monetary Fund (IMF) to finance the budget and respond to COVID-19 is missing, diverted, or unaccounted for.”
The lawsuit came as a result of the Nigerian Auditor-General’s 2020 report, which claimed the more than $3 billion in IMF funding could not be found. Additionally, the Auditor-General stated that no information or document was provided to justify the movement and spending of the funding.
Despite this report, an IMF statement on the release of the $3.4 billion loan said, “to enhance transparency and governance, the Nigerian authorities committed to undertake an independent audit of crisis-mitigation spending and related procurement processes, and to publish procurement plans and notices for all emergency-response activities, including the names of awarded companies and beneficial owners.”
SERAP labeled the misappropriation of the loan as ‘double jeopardy’ for Nigerians, saying “they [the public] can never see nor benefit from the projects for which the loan was approved yet they are made to pay back both the loan and the accrued interest.”
Following SERAP’s announcement of the lawsuit against Tinubu on March 3rd, the NGO, on April 14th, released an additional request for information to President Tinubu, urging him “to direct appropriate ministries, departments and agencies (MDAs) to provide our organization with copies of the loan agreements obtained by the governments of former presidents Olusegun Obasanjo, Umaru Musa Yar’Adua, Goodluck Jonathan and Muhammadu Buhari.” In the request,SERAP is also seeking “the spending details of any such loans as well as the interests and other payments so far made on the loans.”
Under former President Buhari’s administration (May 2015 – May 2023), $21.27 billion in debt was accumulated, more than three times the combined amount of debt accrued by Nigeria’s previous administrations since 1999.
Bola Ahmed Tinubu, Buhari’s successor in the All Progressives Congress (APC) party, inherited Buhari’s vast external debt, triggering him to implement sweeping economic reforms much to the dismay of the Nigerian populace. As of December 2023, Nigeria owed $42.5 billion in external debt.
As part of Tinubu’s reforms, fuel subsidies, which had been in place since the 1970s, were partially scrapped. The exchange rate was also unified, devaluing the Nigerian Naira by one-third.
Despite the state of the Nigerian economy at the present moment, Finance Minister Edun’s comments on the possible granting of the $2.25 billion loan from the World Bank encapsulates the view of the country’s political elites on the nation’s debt crisis:
“If you look at the fact that we have qualified for the processing, just this week to the board of directors of the World Bank, of the total package of $2.25 billion of what you call, I mean, if there’s no such thing as free lunch, but it is the closest you can get to free money.”
Edun claimed the loan is set for 40 years, has a 10-year moratorium and holds the same interest rate as the IMF’s $3.4 billion loan of ‘about’ 1 percent.
Oil Revenue as Key, But For Whom?
Edun reiterated the importance of oil revenue for the nation to pay its debts, claiming President Tinubu seeks to increase Nigeria’s oil production from 1.6 million barrels per day to 2 million barrels per day.
Despite this, Nigeria was producing just 1.3 million barrels per day in March 2024, down 38 percent from the 1.4 million barrels it was producing per day in February 2024.
Adding to the questions around Nigeria’s lowered oil production is the third lawsuit to be filed by SERAP this year, this time against Nigeria’s National Petroleum Company (NNPC) for “failure to account for and explain the whereabouts of the alleged missing $2.04 billion and N164 billion oil revenues [as outlined in the 2020 Auditor-General report].”
According to SERAP, the Company failed “to remit the revenue into the federation account, [with the Auditor-General’s report] claiming the money could have been diverted.”
Furthermore, NNPC, in its report to the Federal Accounts Allocation Committee in August of 2022, claimed the country made zero dollars from crude oil exports in the month of July for 2022. NNPC’s Chief Financial Officer Umar Ajiya claimed the failure to remit funds into the federation account was due to the Company’s payment of petrol subsidies.
By 2023, the NNPC was not able to shake its corruption allegations, with the United States Department of Justice (DOJ) recovering $53 million in profits obtained from corruption in the Nigerian oil industry.
According to the DOJ, between 2011-2015, two Nigerian businessmen “conspired with others to pay bribes to Nigeria’s former Minister for Petroleum Resources, Diezani Alison-Madueke, who oversaw Nigeria’s state-owned oil company. In return, Alison-Madueke used her influence to steer lucrative oil contracts to companies owned by Aluko and Omokore. The proceeds of those illicitly awarded contracts totaling more than $100 million were then laundered in and through the United States and used to purchase various assets through shell companies, including luxury real estate in California and New York as well as the Galactica Star, a 65-meter superyacht.”
However, the awarding of lucrative contracts obtained through bribery is not the only method used to funnel funds out of the NNPC. A 2022 study conducted by the London School of Oriental and African Studies (SOAS) on the corruption and mismanagement of Nigeria’s excess crude account (ECA) found links between the Nigerian legislature, the NNPC, and indiscriminate withdrawals from what was once Nigeria’s largest sovereign wealth fund.
According to the SOAS consortium, the excess crude account (ECA) was established in 2004 by the Olusegun Obasanjo Administration to “save excess oil revenues against budget shortfalls due to the volatile crude oil prices. At its height, the ECA accumulated almost $20 billion and was a major source of stabilization funds during the 2008 global financial crisis.”
Incidentally, under the Obasanjo administration, $18 billion in debt owed to the Paris and London clubs of creditors was paid off, paving the way for the forgiveness of almost $30 billion in debt also owed. By 2006 under Obasanjo, Nigeria became the first African country to settle its public debt.
However, throughout the years the ECA has fallen under massive mismanagement and become subject to mass looting. Due to this, the ECA was unable to be turned to at the onset of the COVID-19 pandemic, forcing Nigeria to borrow from multilateral institutions such as the IMF, where it secured the $3.4 billion in 2020.
The cause of this, SOAS claims, is the legislature’s lowering of the ECA’s annual savings level in conjunction with under-contributions from the NNPC as well as “unapproved and indiscriminate withdrawals from the ECA.”
According to SOAS, “The data shows that the ECA experienced substantial and consistent withdrawals at times when the economic environment was strong (2005-2006 and 2011-2014) and when it was weak (2008–2010). In fact, withdrawals peaked in 2011–the same year that Nigeria recorded its highest oil revenues. Major sources of ECA withdrawals include current-year expenditures, fuel subsidies, debt financing, and power projects–all of which are outside the fund’s mandate.”
Thus, one begins to see a concerning pattern of borrowing and repurposing amongst the Nigerian political elite and state-owned enterprises. The pattern highlights a trend of borrowing large sums to fill the political elites coffers, and when repayment is needed, state-funds are pillaged to make up the shortfall, leaving the Nigerian public ever the more destitute.
As of 2023, according to World Bank data, the poverty rate in Nigeria is estimated to have reached 38.9 percent, with 87 million Nigerians living below the poverty line.
Corruption is rife in Nigeria’s oil sector and elsewhere, and despite President Tinubu’s efforts to combat corruption through the suspending of the nation’s Central Bank Governor and removal of the head of the Economic and Financial Crimes unit for abuse of office, Tinubu himself still partakes in ‘quieter’ corruption.
Tinubu’s indulgence in nepotism has been widely covered, with the President appointing his son-in-law, who is also a former member of the nation’s House of Representatives, to the position of CEO of the Federal Housing Authority (FHA).
So, What Now?
Existing as the second largest economy in Africa of course comes with various complexities. However, Nigeria is in clear need of governmental transparency in regards to its financial management practices. SERAP’s repeated calls for probes into the mismanagement of loans received from multinational institutions, coupled with its lawsuits against the nation’s petroleum company clearly highlight a massive disparity between the actions of government and state-owned enterprises and the information relayed to the public, despite the public being the one to bear the brunt of Tinubu’s latest economic reforms.
One must also question why multilateral institutions such as the IMF and World Bank are willing to lend large sums of money on the pretense of ‘assistance’ with the knowledge that a large portion of the fund is to be diverted into the pockets of the political elite. Various economists claim that this occurs as a result of the IMF and World Bank’s predatory lending practices, particularly in the third world and to nation’s with governments who lack transparency, as in the case of Nigeria.