Menu

The Federal Government of Nigerian has requested for a $2.5 billion loan from the World Bank and $1 billion loan from the African Development Bank to fund the country’s budget deficit, according to a report by the Financial Times today.  

Nigeria is in the process of fiscal adjustment as fallen oil prices have led to significant shocks on government revenues. An International Monetary Fund (IMF) mission to Nigeria recently said the Nigerian economy grew 2.8-2.9 percent in 2015 and is expected to grow 3.25 percent this year, down from an average 6.8 percent growth over the last decade. Foreign reserves are down to $28 billion as the Central Bank of Nigeria (CBN) continues to impose restrictions in the foreign exchange market, while rejecting calls to devalue the naira.

The World Bank loan would come as part of its development policy lending, and would be at below-market rates. The loan is subject to an IMF endorsement of the Nigerian government’s economic policies. During a six-day visit to Nigeria and Cameroon earlier in January, IMF's Managing Director, Christine Lagarde expressed satisfaction with the government’s determination to boost non-oil revenues and said she was not in the country to negotiate an IMF programme.  

The African Development Bank has said it engaged with the Nigerian government last week during a high-level mission to Nigeria between Wednesday and Friday. The meeting was to ascertain the Nigerian government’s key development priorities and find opportunity to improve the business climate.

The team of Department Directors was led by Charles Boamah, Acting First Vice President and Vice President, Finance. The team met with Prof. Yemi Osinbajo, Nigeria's Vice President, the AfDB said in a statement.

Discussing the administration’s policy reforms, the Vice President said, “The true wealth of Nigeria lies not in oil, but the character of the Nigerian. We will focus on building infrastructure to boost the enterprising nature of the Nigerian.”

 The AfDB team assured the Vice President that the AfDB team was in Nigeria to listen and support the Government in implementing the identified economic growth and social development priorities.

The team also met with the Permanent Secretary, Ministry of Finance, Mahmoud Isa Dutse, to discuss on conceptualizing new projects to make them bankable and also determine how to expedite implementation of existing projects by eradicating bottlenecks.

While meeting with Governor of the CBN, Godwin Emefiele, the Governor informed the team that diversification of the Nigerian economy to curb dependency on oil is a top priority for the country.
 
The AfDB loan is also subject to the approval of the bank’s board. The bank’s President, Akinwumi Adesina, is expected to visit President Muhammadu Buhari in the coming weeks to consolidate future partnerships, the AfDB said.

President Buhari has also embarked on an anti-corruption crusade to install a regime of fiscal discipline while also seeking the assistance of Western governments to locate and return $150 billion in funds stolen in the past administrations and held in foreign bank accounts on behalf of former, corrupt government officials.

President Buhari presented the 2016 Appropriation Bill to the National Assembly in December. The N6.08 trillion ($30.71 billion) proposed budget for 2016 has a deficit of N2.22 trillion ($11.21 billion), which is equivalent to 2.16% of GDP and will take the country's overall debt profile to 14% of GDP.

The government plans to finance part of the deficit through domestic and foreign borrowings. About N900 billion ($4.55 billion) of the deficit would be sourced from foreign debt markets. The government has begun the issuance of N390 billion ($1.96 billion) sovereign bonds in the first quarter of 2016 and has also announced plans to issue Islamic bond this year.