World Bank Warns Nigeria, Others as Investors Shun Debt-ridden Economies

The World Bank has warned that foreign private capital is fleeing developing economies like Nigeria due to rising debt levels and weak growth prospects. This trend is particularly concerning for countries with high debt burdens, as investors are likely to assume that economic gains will be used to pay off debts rather than stimulate growth.

By Rhalialt Arhuoizah

*Key Concerns:*

- *Rising Debt Levels*: Nigeria's debt to the World Bank stands at approximately $17.32 billion, with a proposed external borrowing plan of $21.5 billion to fund infrastructure projects.
- *Weak Growth Prospects*: The forecast for global GDP growth in 2025 has been downgraded to 2.2%, down from 2.6% earlier predicted, and below the average growth rates seen in the 2010s.
- *High Interest Rates*: Central banks in advanced economies are expected to keep interest rates at an average of 3.4% this year and next, over five times higher than the annual average between 2010 and 2019 .

*Consequences:*

- *Reduced Investment*: Many developing countries are slashing investment in critical sectors like education, healthcare, and infrastructure to service ballooning debts.
- *Increased Poverty*: The World Bank estimates that 104 million Nigerians, 47% of the population, were living below the poverty line in 2023, with predictions that the poverty rate could climb to 56% by 2027.
- *Fiscal Crisis*: Government interest payments have doubled for half of all developing countries, signaling a structural crisis in public finance management .

*Recommendations:*

- *Fiscal Consolidation*: The World Bank urges debt-laden governments to prioritize fiscal consolidation and implement trade and investment-friendly reforms.
- *Prudent Debt Management*: Setting prudent debt-to-GDP thresholds, 40% for low-income countries and 60% for high-income nations, to prevent future crises.
- *Strengthening Social Safety Nets*: Governments should focus on strengthening social safety nets to combat poverty and reduce inequality .