Africa's biggest oil producer seeks World Bank, AFDB support.
Feb 10, 2016 Nigeria recently held talks with the World Bank and the African Development Bank to solicit support as it strives to cope with low crude prices and weakening currency.
According to Nigeria’s ministry of finance, the country is planning to borrow about 5 billion dollars to help fund a budget deficit due to a decline in oil revenues.
The sharp drop in crude revenues, which is the country’s main foreign earner, has led to the naira hitting record lows on the parallel market.
Commenting on the situation, Bismarck Rewane, a Nigerian economist said:
“First and foremost, is it a good idea to borrow? Yes. Is it a good idea to spend and fund your budget deficit thereby stimulating the economy and jump starting it into growth? Yes. Is it a good idea or is it efficient to borrow from the multi-laterals at concessionary rates? It’s an excellent idea. So, all told, this is the best way to go for Nigeria. What are we going to use the proceeds from the borrowing for? Very important question. The proceeds are going to be used to fund projects within the budget which have life span in excess of one year,”
Nigeria’s finance ministry also said that the country was looking at options to borrow from the African Development Bank and China Exim Bank due to their concessionary interest rates.
Commenting on this, Rewane said:
“A deficit budget funded by concessionary loans from the multi-lateral agencies is prudent and cost effective. In other words, you are borrowing at an average rate of 2 percent or 3 percent as against market rate of 12 percent. You are saving Nigeria 900 basis point, right, 9 percent on almost 4 billion dollars. That is significant,”