FG eyes $1.5bn loan from World Bank

…Considers tapping domestic dollar savings

The Federal Government has revealed its intention to obtain a loan facility of $1.5 billion from the World Bank.

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun stated this in an interview with Bloomberg Tv on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland said the loan will support the budget and also provide liquidity in the forex market.

According to the Minister, the reforms with respect to fuel subsidy removal and merger of the foreign exchange market require some form of support from multilateral organisations.

He explained that, “We’re hoping to get $1 billion or $1.5 billion from the World Bank. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.

“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.”

Speaking further, Mr Edun said that the government’s priority is to stabilise the naira through liquidity.

He explained that receipts from crude oil sales remain the main source while also looking at domestic dollar savings with and outside the official market.

According to him, “The priority is to stabilise the naira, that means getting in the additional liquidity – number one from oil revenue.

“We are also looking to make sure we tap Nigerian savings, in particular domestic dollar savings both inside and outside the formal market. There’s a lot of cash in the Nigerian economy.”

Furthermore, he noted that the priority of the CBN still remains clearing the FX backlog which he estimates at $5bn.

He said, “There is actually liquidity within the banking system and there should be a way of getting the banks to actually help with that backlog, either on a spot or a forward-rate basis.

“We believe that if we coral the dollars that are available, we can pay down that backlog almost in one fell swoop.”

The Minister also hinted that Nigeria is contemplating issuing Eurobonds later in the year if the rates are considerably lower stating that major issuers have informed the country of the possibility this year.

Meanwhile, the Central Bank of Nigeria (CBN) revealed that it has effectively distributed around $2.0 billion.

This significant intervention has targeted industries such as manufacturing, aviation, and petroleum, aiming to alleviate the pressure of outstanding debts.

The Acting Director of the CBN’s Corporate Communications Department, Mrs. Hakama Sidi Ali, revealed these developments during a briefing in Abuja on Wednesday, January 17, 2024. Mrs. Sidi Ali emphasised the central bank’s commitment to resolving the forex backlog issue by initiating payments to qualified transactions.

As part of the transparency measures, the CBN commissioned an independent forensic review conducted by a reputable firm. Mrs. Sidi Ali highlighted that the forensic review uncovered severe infractions, gross abuse, and substantial non-compliance with market regulations.

To address these findings, the CBN will collaborate with relevant agencies to enforce appropriate sanctions.

While underscoring the importance of regulatory compliance, Mrs. Sidi Ali reiterated the CBN’s dedication to sanitising the financial services sector.

The overarching goal is to foster trust among all market participants, internal and external stakeholders, thereby ensuring the stability and integrity of the Nigerian economy.

Despite the enforcement measures, the CBN remains committed to settling legitimate foreign exchange backlogs, maintaining a consistent track record in the last three months.