Nigeria has held exploratory talks with the World Bank to borrow in order to help fund a record budget in 2016 but has not applied for any emergency loans, Finance Minister Kemi Adeosun said on Sunday.
Africa’s top oil producer is planning to borrow as much as $5 billion to help fund a budget deficit due to a slump in vital oil revenues, of which $4 billion might come from international institutions and the rest from Eurobonds, Adeosun had said earlier this month.
But the minister, in a statement issued by her Special Adviser on Media Matters, Mr. Festus Akanbi, on Sunday categorically stated Nigeria did not apply for any emergency loan.
The statement quoted the minister as saying “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 N1.8trillion principally for investment in capital projects to stimulate the economy.”
She said 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.
The proposed budget deficit, according to her, will be funded equally through external and domestic sources. 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.
She said the need to invest in infrastructure to stimulate the economy and the long-term payback period of capital projects demands that lowest cost of fund be obtained.
“Nigeria, as a member of World Bank group is entitled to access available funds like every member-country.”
Mrs. Adeosun, said, however, no application for loans have been made. “We are simply discussing options for funding 2016 budget.”
Recall that as part of its Medium Term Expenditure Framework and Fiscal Strategy, the Federal Government had indicated its plan to stimulate the economy and achieve a real GDP growth rate of 4.2 per cent in 2017.
It also plans to reduce the cost of governance, extracts efficiencies in public service and enhancing revenue collections; increase government expenditure on infrastructure i.e. transport, roads, housing and power with a view to achieving a substantial increase in gross capital formation; and to fund the budget deficit and the negative trade balance in a cost effective and efficient manner, while maintaining an acceptable debt sustainability ratio.
However, defending such a move to get funds from the World Bank, Chief Africa economist for Standard Chartered bank Razia Khan told the BBC that doing so could be attractive as it may offer Nigeria better terms for a loan than it would get from the international money markets.
Nigeria is deliberately boosting spending on infrastructure development to try to boost the economy as it tries to deal with the oil price shock, she added.
The country is also under pressure to devalue the currency, the naira, as it tries to cope with the impact of the declining oil price.
