FG seeks $3.5 billion loan from World Bank, AfDB

folarin okunola

February 1, 2016 8:59 AM

A projected deficit of $11bn, or 2.2 per cent of gross domestic product, had already risen to $15bn, or 3 per cent, due to the recent turmoil in oil markets.

President Muhammadu Buhari

Media reports reveal that the Federal Government has asked the World Bank and African Development Bank (AfDB) for $3.5 billion in emergency loans to fill a growing gap in its budget.

The request is intended to help fund a $15 billion deficit in a budget heavy on public spending as Nigeria attempts to stimulate a slowing economy and offset the impact of slumping oil revenues, according to media reports.

Nigeria’s economy is Africa’s largest and has been hit hard by the drop in crude prices. Finance minister Kemi Adeosun told the Financial Times recently that she was planning to return Nigeria to bond markets for the first time since 2013.

The $2.5bn loan from the World Bank and a parallel $1bn loan from the AfDB, which would enjoy below-market rates, also still has to be approved by both banks’ boards.

READ: FG approves $200 million World Bank loan for projects

Under World Bank rules the loan would be subject to the IMF’s endorsement of the government’s economic policies and bank officials say they would have to be confident the Nigerian government was undertaking significant structural reforms.

“I think we all agree that Nigeria is facing significant external and fiscal accounts challenges from the sharp fall in . . . oil prices, as of course are all oil exporters,” Gene Leon, the IMF’s representative in Nigeria, told the FT. But he added that Nigeria was not in immediate need of an IMF program. “We are not in that space at all,” he said, according to a report by Nigeria CommunicationsWeek.

An IMF mission that visited the country in January as part of a regular review estimated that Nigeria's economy grew 2.8-2.9 percent in 2015 and predicted it would register 3.25 per cent growth this year, down from an average 6.8 percent growth in the decade.

folarin okunola