Last week, the UK's Financial Times reported that Nigeria has approached both banks for short term loans to fund the 2016 budget which was in a deficit due to low all oil prices. According to the report, with the collapse in global crude oil prices to the current $27 a barrel from the highs of $100 a barrel last year, the government was unable to meet its 2016 spending commitments.
However, Ms Adeosun has dismissed the reports as untrue, adding that Nigeria had not applied for any emergency loan. She added that any loans the government obtains from the World Bank will be used to fund long-term capital and infrastructural projects.
Ms Adeosun said: “The truth is that Nigeria, as part of the plans to fund the 2016 budget currently undergoing the approval process of the National Assembly, has indicated an intention to borrow N1.8trn principally for investment in capital projects to stimulate the economy. However, our proposed budget deficit will be funded through external and domestic sources."
According to the minister, the option of the World Bank is to ensure an optimum financing structure, noting that 2016 budget is part of the medium-term economic framework of the federal government, which the World Bank is aware of. She added that Nigeria is exploring the options of multi-lateral agencies like the World Bank and AFDB and export credit agencies such as China Exim Bank due to their concessionary interest rates to fund the budget deficit.
In its report, the Financial Times had said the federal government is seeking $3.5bn (N697bn) in emergency loans from both the World Bank and AfDB to fill a growing gap in its budget. It added that a $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.
Under World Bank rules, its loan will be subject to an International Monetary Fund (IMF) endorsement of the government’s economic policies. World Bank officials said they would have to be confident that the Nigerian government was undertaking significant structural reforms before lending the country any money.
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. However, Nigeria’s economy has been hit hard by the fall in crude prices as oil revenues are expected to fall from 70% of government income to just a third this year.
Ms Adeosun had recently said Nigeria was planning its first return to the bond markets since 2013. An IMF mission that visited Nigeria in January as part of a regular review which estimated that Nigeria’s economy grew by between 2.8% and 2.9% in 2015 and predicted growth would be 3.25% this year, down from an average 6.8% over the last decade.
Nigeria's financial buffers are also eroding as 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 just $2.3bn.
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