By Omodele Adigun with Agency Report
The African Development Bank’s board has approved a $600 million loan for Nigeria on Wednesday aimed at helping the nation to address its budget deficit , a senior bank official said.
The loan is the first tranche of a total $1 billion budget support package. The second disbursement of $400 million is dependent upon the implementation of reforms, the bank’s Nigeria country director, Ousmane Dore, said.
Dore said one of the main triggers for the release of the remaining tranche would be when the government spells out its plan for overcoming its current economic challenges.
“The economic recovery plan that the government is working on must be a package of comprehensive reforms, including even exchange rate policy, the consistency with regards to the monetary policy and structural reforms,” he said.
If it meets the bank’s reform requirements, the tranche is expected to be approved by the board early next year.
The bank noted that oil generates around 70 per cent of Nigeria’s revenues. The drop in prices has left Nigeria struggling to fund a record N6.06 trillion ($20 billion) 2016 budget that aims to stimulate growth by tripling capital expenditure.
Recall that last September, the bank said it would support Nigeria with $1 billion to help it address the N2.2 trillion deficit in this year’s budget.
Its President, Akinwunmi Adesina, said the facility would attract a 1.2 per cent interest.
He said that between 2016 and 2017, the bank would provide $4.1 billion to assist the country fund power, infrastructure, agriculture and the private sector as well as the SMEs’ financing and lending scheme.
Adesina said the bank’s lending portfolio in Nigeria would grow to a total of $10 billion by 2019.
Disagreeing with those saying Nigeria is in a debt crisis, the AfDB president said Nigeria was only experiencing liquidity problem.
He said the bank recognised that power remained the most important challenge driving inflation in the country and had, therefore decided to invest in a total of 1,400 megawatt of projects this year and 1,387 megawatt of project by 2017 to revamp the energy sector.
Adesina said, “We have a very strong delegation team to meet the Vice President and the economic management team, because the bank’s (ADB) largest shareholder is Nigeria.
“It is very important for me to be here and to talk to the Nigerian government about the challenges and opportunities that are in Nigeria. I think the times are difficult there is no doubt about that, but I want to commend the government for being bold in taking the right decisions.”
I think that the fact that the price of crude oil has gone down is a big challenge because you have 98 per cent external forex revenue coming from the sector. So it has created calibrations, I’m not going to go into the details of all the problems but what is important is that what we going to do about it.”