Nigeria is in talks with the World Bank to secure up to $1.5 billion of budget support to help ease a severe dollar shortage that has contributed to the naira’s steep decline.
Finance Minister Wale Edun said in a Bloomberg Television interview on Wednesday that the country hopes to get the funding by the end of March, as it continues to implement economic reforms. The loan would be the first tranche of a larger package that could reach $4 billion, according to Edun.
“We think we will get the support because we are continuing with our reforms,” he said.
Nigeria has been hit hard by the COVID-19 pandemic and the slump in oil prices, which account for about 90% of its foreign exchange earnings. The economy contracted by 4.5% in the third quarter of 2023, and the naira has lost more than 30% of its value against the dollar in the past year.
The World Bank has been in discussions with Nigeria since last year but has delayed the disbursement of the loan due to concerns over the country’s exchange rate policy and fiscal management. The lender has urged Nigeria to unify its multiple exchange rates and phase out costly fuel subsidies.
Edun said the government has made progress on both fronts, by removing the gasoline subsidy and unifying and significantly liberalizing the exchange rate. He also said the government is committed to reducing its recurrent expenditure and boosting its revenue base.
“We have a very clear fiscal consolidation plan that will take us to a more sustainable fiscal position in the medium term,” he said.
The World Bank loan would complement the $3.4 billion emergency financing that Nigeria received from the International Monetary Fund in April 2023. Edun said the country is not planning to seek debt relief from its bilateral or commercial creditors, as some other African nations have done.
“We believe we can manage our debt portfolio very well. We don’t see any need to restructure or reschedule our debt at the moment,” he said.
Edun also said the country may issue a Eurobond in late 2024, depending on the market conditions and the budgetary needs. Nigeria last tapped the international debt market in 2018, when it raised $2.86 billion.
The finance minister expressed optimism that Nigeria will overcome its economic challenges and return to growth this year, as the global demand for oil recovers and the domestic production of vaccines ramps up.
“We are very confident that we have the right policies and the right support from our development partners to get us back on track,” he said.
Source: Bloomberg
