FG eyes $1.5bn World Bank loan to finance budget deficit

…As Minister pledges to respect CBN autonomy, Ways & Means borrowing limit

The Federal Government of Nigeria is eyeing a $1.5billion World Bank loan to finance the country’s budget.

This follows the falling oil prices and shortfall of production projected by the 2023 budget leaving over N12 trillion deficit needed to finance the budget.

Nigeria has a benchmark oil production of 1.69 million bpd for the year, Nigeria has not been to hit that target between January and September.

Recently, oil production on a daily basis hit 1.346 million barrels in September according to

data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

The latest figure signifies a 14 percent compared to 1.181 million barrels produced in August.

While briefing the press on highlights of Nigeria’s participation in the just concluded annual meeting of the World Bank/International Monetary Fund, IMF, in Marrakesh, Morocco, Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun said that Nigeria has now become first consideration for foreign investment following the positive response to the reforms measures introduced by the Federal Government.

The Minister said, Nigeria is now at the forefront of consideration for foreign investment among the international community.

He said, “There have been many conversations and as I said earlier, the narrative is that with the bold courageous steps that Nigeria has taken, the narrative is that we are now at the forefront, almost number one on people’s list when they want to look at where to invest. That is the narratives and I am sure if you have been around through this week, you would have picked it up.

“There is more to be done but Nigeria is definitely on the right path, that we have taken the right decision for the economy to recover and for it to attract foreign direct investment and as well I will add domestic investment in order to recover full economic growth, job creation and at the same time achieve inclusivity of women and young people.

“That is the opportunity we have had, not so much to stand in front of people and showcase but that they get the opportunity within this environment to understand even more clearly what has been done.”

Edun also disclosed that the World Bank will soon release a $1.5 billion loan to Nigeria, which had been in the pipeline for a while adding that given the prevailing high interest rate regime across the world, the FG will focus on initiatives for financing on reasonable terms.

He said, “On the talks with the World Bank on $1.5 billion budget support, that is correct. The World Bank is the number one multilateral development bank helping developing countries or funding developing countries, projects and programmes, and sectors.

“It has free money through either International Development Association (IDA). It is for the poorer countries and right now I think we qualify as one of the countries that can borrow in the normal window of World Bank funding but also some concessionary IDA funding and that means that effectively the interest rate will be zero.

“So, therefore, there is no stigma attached to qualifying for World Bank funding to help finance development. In this particular case, it has long been in the pipeline, and we are hoping that funding will come through soon. A lot of hard work is being done. There is a Federal Executive Council meeting on Monday, that should be able to discuss this, as well as other initiatives for financing on reasonable terms. We have talked about the high costs of money, the World Bank money is the cheapest.”

Edun said that notwithstanding the commendations for the reforms, the FG is aware of the painful impact of the reforms on Nigerians, assuring that given the various interventions rolled out in recent times, things should improve day by day.

He said: “These are painful reforms and Mr. President is a man of empathy who promised not to leave the vulnerable and poor behind. And as you know there is a set of interventions being rolled out which day by day should improve things.

“More food has been grown, fertilizers are being released, CNG transport is the order of the day, while the government pauses, conversion kits are on the way, there is take up of that initiative by the private sector.

“So day by day we are moving closer to affordable and even cleaner energy simply because the price of petroleum products has been put where it really stands rather than having cheap fuel which is below the market price and below it’s value. Now you are seeing the right value and that is making the move to cleaner and finer energy.

“I will also add, one of the benefits, when we talk about the benefits coming through some of the measures taken, the fact that there has been a 30 per cent reduction in smuggling of petroleum products across the border, I think is a major achievement of that all important step to remove fuel subsidy.”

Responding to the call by IMF for coordination of monetary and fiscal policy, and the need to balance monetary tightening with fiscal tightened, the Minister said that in view of the commitment of President Tinubu to the rule of law, such coordination will be done based on respect for the autonomy of the CBN as well as respect for the statutory limit on Ways and Means borrowing.

Edun said, “I think that there will be the coordination that is required. However, Mr. President is a man who keeps his word. And one of his priorities is the rule of law and as such, he will keep to the letter and the spirit and the autonomy of the central bank. So it’s within that constraint that the coordination will take place.

“Regarding Ways and Means, President Bola Ahmed Tinubu had even while campaigning as a candidate, President-elect and President has a commitment not to go beyond the statutory limits.”

“One of his priorities is rule of law, sticking to agreements, sticking to law. And so, his commitment is to come within the limit for Ways and Means which essentially means overdraft borrowing from the central bank.

“However, having made that commitment and given that direction of travel, I think the idea and commitment is to come within whatever is the statutory limit as soon as possible. But definitely, we have begun that journey back from the situation of ballooning or seemingly out of control borrowing from the central bank.”

The Minister further disclosed that the FG will deliver this month the Medium Term Expenditure Framework, MTEF, adding that the budget 2024 will be based on an appropriate crude oil price benchmark.

He said, “Regarding the oil benchmark for the budget, there is the Honourable Minister for Budget and Planning, I am sure he is much better placed to answer but as the Coordinating Minister of the Economy, I do have some insight on that. And I will say that I am sure we will come up with a really appropriate oil benchmark and as for the medium-term, economic framework, yes, it will be delivered by this October.”