Debt concerns grow as World Bank moves to approve fresh $500m loan for Nigeria today 

Nigeria is set to secure another $500m loan from the World Bank on Friday as worries persist over the country’s fast-rising debt burden and the Federal Government’s plans for further large-scale borrowing.

The proposed financing, which targets improved access to credit for micro, small and medium enterprises (MSMEs), comes with Nigeria’s total public debt estimated at N152.39tn as of October 2025. The development has also coincided with a government proposal to raise an additional N20tn in loans for the 2026 fiscal year, a move that has drawn criticism from opposition figures, including former Anambra State governor Peter Obi, who described it as reckless.

According to World Bank documents, the loan forms part of the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) Project, which is designed to mobilise private capital and expand innovative financing options for small businesses.

Approval of the facility by the World Bank Group’s board is expected on Friday, December 19, 2025, following ongoing negotiations. If endorsed, the World Bank will contribute $500m to the project’s total estimated cost of $2.39bn.

Of the $500m, $400m will be provided by the International Bank for Reconstruction and Development, while the remaining $100m will come from the International Development Association. The Federal Government will be the borrower, with the Development Bank of Nigeria appointed as the implementing agency responsible for managing and disbursing the funds. The balance of $1.89bn is expected to be raised from commercial lenders without sovereign guarantees.

The World Bank said the FINCLUDE project would leverage the infrastructure of the Development Bank of Nigeria and its subsidiary, Impact Credit Guarantee Limited, to significantly deepen credit access for MSMEs.

“The proposed FINCLUDE Project leverages the platforms of the Development Bank of Nigeria and its subsidiary, the Impact Credit Guarantee Limited, to drive inclusive MSME finance,” the bank said, noting that the project would deploy a mix of innovative instruments tailored to the diverse needs of small businesses.

It described the DBN as a reliable partner with strong implementation capacity and a solid track record in executing complex financial interventions, adding that its role would be central to the success of the project.

The initiative is built around three main pillars: expanding access to inclusive and innovative MSME finance products; de-risking lending and mobilising private capital through partial credit guarantees; and providing technical assistance to modernise and digitise Nigeria’s MSME finance ecosystem.

Under the financing component, the World Bank said Tier-2 subordinated capital would be provided to eligible financial institutions, alongside the establishment of an MSME investment fund offering equity and long-term debt. This approach, it said, would help crowd in private capital, test market innovations and improve financial sustainability in the sector.

The project will also support capacity-building for financial institutions, enhance regulatory oversight and modernise the MSME finance value chain linking the Development Bank of Nigeria, lenders and entrepreneurs.

In its appraisal, the World Bank noted that Nigeria is undergoing a critical economic transition, citing reforms such as the removal of fuel and foreign exchange subsidies and the unification of exchange rates. These measures, it said, have helped stabilise the economy and restore confidence.

“These reforms have improved fiscal space, enhanced FX liquidity and eased inflation to 18 per cent as of September 2025,” the bank said, adding that the International Monetary Fund projects Nigeria’s real GDP growth at 3.9 per cent in 2025.

However, the bank warned that access to finance remains limited, especially for MSMEs, women-owned businesses and agriculture. It noted that agriculture accounted for just over five per cent of total bank credit in 2024, while high interest rates and shallow credit penetration continue to constrain lending.

If approved, the FINCLUDE loan will add to Nigeria’s expanding World Bank exposure. Data from the Debt Management Office show that Nigeria’s external debt stood at $46.98bn as of June 30, 2025, with the World Bank Group accounting for $19.39bn, or 41.3 per cent, of the total.

Nigeria remains the largest borrower from the International Development Association in Africa and the third largest globally, with IDA exposure rising from $17.1bn in September 2024 to $18.5bn in September 2025.

Economists caution that while concessional loans from multilateral lenders can support development, the growing pipeline of borrowing could intensify fiscal pressures if not matched with stronger domestic revenue generation and disciplined spending.

Lagos-based economist Adewale Abimbola said World Bank loans are typically concessionary, offering lower interest rates and longer repayment periods, but stressed that effective deployment is crucial.