The Federal Government is seeking from the World Bank and the African Development Bank the sum of $3.5bn (N697bn) in emergency loans to fill a growing gap in its budget.
The $2.5bn (N498bn) loan from the World Bank and a parallel $1bn (N199bn) loan from the AfDB, which will enjoy below-market rates, must still be approved by both banks’ boards, the Financial Times reported.Both loans will carry far fewer conditions than one from the IMF, which does not believe that Nigeria needs a fully-fledged international bailout at this point.
The loan request is intended to help fund a N2.9tn ($15bn) state deficit, which has been deepened by a hefty increase in public spending as the country attempts to stimulate a slowing economy.It came as concerns grow over the impact of low oil prices on petroleum exporting economies in the developing world.
But Nigeria’s likely borrowing costs have been rising alongside its budget deficit. A projected deficit of N2.1tn ($11bn), or 2.2 per cent of gross domestic product, had already risen to N2.9tn ($15bn), or three per cent, as a result of the recent turmoil in oil markets.
“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,” the IMF’s representative in Nigeria, Gene Leon, told the FT.But he added that Nigeria was not in immediate need of an IMF programme. “We are not in that space at all,” he added.
The country’s financial buffers are eroding,the Central Bank of Nigeria’s foreign exchange reserves have nearly halved to $28.2bn from a peak of almost $50bn just a few years ago. A rainy-day fund that had $22bn in it at the time of the 2008-09 global financial crisis now has a balance of $2.3bn.
Excerpts from FinancialTimes
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