The federal government has sought the World Bank and African Development Bank for $3.5bn in emergency loans to bridge the widening gap in its budget, the Financial Times of London has reported.
The request from President Muhammadu Buhari’s government is intended to help fund a $15bn state deficit, which has been worsened by a huge increase in public spending.
Finance minister Kemi Adeosun told the Financial Times recently that she was planning Nigeria’s first return to bond markets since 2013.
However, Nigeria’s likely borrowing costs have been rising alongside its budget deficit. A projected deficit of $11bn, or 2.2 per cent of gross domestic product, had already risen to $15bn, or 3 per cent, as a result of the recent turmoil in oil markets.
The $2.5bn loan from the World Bank and a parallel $1bn loan from the ADB, which would enjoy below-market rates, must still be approved by both banks’ boards. Under World Bank rules its loan would be subject to an IMF 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.
But both loans would carry far fewer conditions than one from the IMF, which does not believe Nigeria needs a fully fledged international bailout at this point.
“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 Financial Times.