Nigeria seeking new $1.5b World Bank loan to raise debt to $115.85b
By Jeph Ajobaju, Chief Copy Editor
Nigeria is seeking a new $1.5 billion loan from the World Bank to beef up naira exchange value, which will raise the country’s debt to $115.85 billion, having piled up in the Muhammadu Buhari years of the locust.
The Debt Management Office (DMO) disclosed in December last year Nigeria’s total public debt had reach N87.91 trillion or $114.35 billion as of 30 September 2023,
Wale Edun, Finance Minister and Coordinating Minister for the Economy, disclosed the quest for the new loan to Bloomberg and linked it to the need to improve supply of foreign exchange (forex) and soften the pressure on exchange rate.
But he stressed the Central Bank of Nigeria (CBN) has reduced forex backlog to $5 billion.
“We’re hoping to get $1 billion or $1.5 billion from the World Bank” for budgetary support. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms,” he said.
President Bola Tinubu at his inauguration on 29 May 2023 scrapped fuel subsidies and relaxed exchange rate policy.
The reforms have been welcomed by international investors but caused a surge in the cost of living, with inflation hitting a 27-year high of 28.9 per cent in December 2023 and the naira slumping about 50 per cent in value against the dollar.
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Loan as reward for implementing reform
“What we’ve done with fuel subsidies, what we have done in terms of the foreign-exchange market reform, deserve support. We’ve done enough and we deserve to be rewarded imminently,” Edun added.
The government is also confident of having access to the eurobond market and may look to tap it later this year, if rates move sufficiently lower.
“The major issuers and the book runners have told us that there should be a window for Nigeria in the eurobond market.”
Nigeria still operates an official exchange rate and provides dollars via the CBN to customers at that level.
But a lack of United States dollars in the domestic market causes a backlog of demand from companies that want to convert naira to dollar to repatriate profits and pay bills. That pushes activity into the unofficial market, where the naira changes hands at much weaker levels against the dollar.
Edun said the CBN puts the current backlog at about $5 billion, following efforts to pay it down, and he expressed confidence it could be cleared easily if steps to lift oil revenue and mobilise dollars already in the economy succeed.