NIGERIA SET FOR ANOTHER $2.25B WORLD BANK LOAN

The Federal Government of Nigeria has announced its qualification for a loan from the World Bank, totaling $2.25 billion.

Wale Edun, the finance minister, unveiled this during a joint press conference held by the Ministry of Finance and the Central Bank of Nigeria (CBN) at the spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington D.C.

Speaking following the IMF/World Bank spring meetings in Washington D.C. at the weekend, Edun said the Nigerian government is also aiming to issue diaspora bonds later this year to attract foreign exchange into the country.

The World Bank loans would comprise 1.5 billion dollars in development policy financing and 750 million dollars in programme-for-results financing.

The bank's board is expected to meet in June to approve the request, Edun said.

Nigeria has faced a foreign exchange shortage that pushed its naira currency to record lows versus the US dollar this year, though it has since rebounded.

He said the package, approved by the Board of Directors of the World Bank, offers a 40-year term with a 10-year moratorium and a nominal 1 percent interest rate.

Edun said, “If you look at the fact that we have qualified for the processing, just this week to the Board of Directors of the World Bank, of the total package of $2.25 billion of what you can call, I mean, if there is no such thing as a free lunch, but it is the closest you can get to free money. It is virtually a grant. It is for about 40 years, 10 years moratorium and about 1% interest. So that also is part of the flow you can count.”

He added that Nigeria is also set to benefit from budgetary support and low-interest funding from the African Development Bank, noting that negotiations with foreign direct investors are also underway.

Edun addressed concerns about debt sustainability by emphasizing the pivotal role of revenue generation in Nigeria’s economic strategy.

He highlighted oil revenue as a primary source and President Bola Tinubu’s ambitious goal to increase oil production from 1.6 million barrels per day to 2 million barrels per day.

“These measures are crucial for enhancing our fiscal resilience and ensuring long-term economic stability,” the finance minister said.

In a bid to strengthen its foreign exchange reserves and attract investment, Nigeria is exploring innovative avenues with particular emphasis on leveraging remittances from its diaspora community.

The finance minister underscored the immense potential of Nigerians living abroad, acknowledging their substantial financial resources that could significantly benefit the Nigerian economy

“There are Nigerians abroad who are thriving financially,” remarked Edun, emphasizing their capacity to make substantial contributions to Nigeria’s economic growth and development.

“The government is looking at attracting those funds and capturing those funds through a diaspora type of instrument, a diaspora bond. We think that would be a very attractive instrument for Nigerians abroad and for foreign holdings of foreign currency and we look to having a substantive, substantial and successful issue later in the year,” Edun revealed.

Nigeria won rare plaudits from the World Bank and IMF during the spring meetings last week in Washington as the country’s structural reforms continue to gain global attention.

The 2024 Spring Meetings highlighted the global economy’s improved resilience, acknowledged by economic leaders worldwide.

Despite a global economic environment challenged by high inflation rates and ongoing geopolitical tensions, Nigeria has emerged as a regional leader in promoting sustainable economic practices.

The World Bank and IMF commended Nigeria’s efforts in tightening monetary policies, revising the country’s growth forecast upwards to 3.34 percent for this year – a reflection of the effectiveness of the administration’s economic policies.

Highlighting key initiatives that have turned around the economy at the IMF/World Bank Spring Meetings, Wale Edun, minister of finance and coordinating minister of the economy, said: “Our focus on agriculture, manufacturing, and electricity aims not only to stabilise prices but also to secure food and reduce dependency on imports.”

“These initiatives, coupled with the inflation targeting policies of the Central Bank, are expected to reduce inflation by the second half of the year, which would allow for a potential reduction in interest rates,” Edun said.

The minister also noted that the government is committed towards ensuring the country’s currency maintains its position as a strong store of value.

There’s more help on the way for the naira which has gone from the world’s worst performing currency to the best in April.

Though the reforms have accelerated Nigeria’s headline inflation to a record of 33.2 percent in March, the International Monetary Fund (IMF) said it will decline to 23 percent by 2024 and then 18 percent in 2026.

Olayemi Cardoso, the central bank governor has also ramped up efforts to put the country’s economy back on track by clearing an inherited $7 billion backlog and hiking the monetary policy rate twice this year.

Cardoso raised the lending rate by a combined 600 basis points to 24.75 percent in a bid to tame the stubbornly high inflation.

The CBN chief also resumed the sales of $10, 000 US dollars to Bureau de Change operators in February every week, mandating them to only sell at a spread of 1.5 percent, which comes to N1,117 per US dollar.

With all these measures, the naira, which was almost hitting N2,000/$ in February, saw a major turnaround.

Analysts are however not comfortable with the IMF/World Bank suddenly praising the Nigerian economic policies to high heavens especially with neither the CBN Governor nor the Finance Minister having come clean on any conditionality attached to the loan.

Both world bodies are not known to give loans and facilities without conditionality. Their loans are usually accompanied by structural adjustments and fiscal policy shifts which opinions say are mostly inimical to the development of the borrowing nations.

The International Monetary Fund (IMF) and the World Bank differ in their respective purposes and functions. The IMF oversees the stability of the world's monetary system, while the World Bank's goal is to reduce poverty by offering assistance to middle-income and low-income countries.

Since 1987, Nigeria has participated in IMF loan arrangements; on February 3, 1989, January 9, 1991, August 4, 2000, and most recently, in 2020, a $3.4 billion IMF loan, reaching 100 percent of its national quota.

It is noteworthy that by 1974, Nigeria was lending money to the International Monetary Fund.

Nigeria joined the IMF on March 30, 1961.Nigeria is Africa's most populous country, with an estimated 222.182 million citizens. The nation's IMF quota stands at 2454.5 million (SDR) along with its special drawing rights amounting to 3702.34 million (SDR).

 As of July 2023, Nigeria experienced a 3.2 GDP change. Moreover, as of 2023, Nigeria has an outstanding IMF credit of 2,147,687,500, with 306,812,500 made in repayments.

SDR, Special Drawing Rights refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969. It operates as a supplement to the existing money reserves of member countries.

1 SDR is equal to about $1.3623 USD