The World Bank is unlikely to approve the much-needed $1.5 billion for Nigeria this month as planned due to concerns over desired reforms, it was gathered yesterday.
In what is described as a major setback over it pan to secure the much needed $1.5 billion for Nigeria this month as planned; the World Bank is unlikely to approve the loan request due to concerns over desired reforms
As reported in one of Nigerians leading newspaper, the Nation, A delay in financing from multilateral lenders could leave the economy and top oil producer, battered by low crude prices, unable to fully finance a record N10.8 trillion ($28.35 billion) budget. The Central Bank of Nigeria (CBN) has said the country’s balance of payments gap this year will be $14 billion.
Earlier the World Bank had warned the Federal government of Nigeria that if the country fails to correct its economic policies especially in the wake of the outbreak of the novel virus, Coronavirus, it is on a slippery slope to heading towards its biggest fiscal crisis that is recession in 40 years. The body had aimed to bring the Loan requested for by Nigeria to its board for approval this month, but according to three sources as stated on the Nation, the negotiations over what the country will do to secure the loan deal was incomplete hence the reason for the possible rejection of the loan request from the World Bank.
According to the various sources it was stated that “They are not convinced about the reforms,” a source close to the government said. All three sources declined to be named due to the sensitivity of the negotiations. The source added that the currency was the core issue.
The approval of bank loans by the World Bank is majorly dependent upon the economic policies and reforms of the borrowing entity. Although it has not listed any demands, but it stated previously that it was looking forward towards having a more unified, flexible exchange rate, fuel subsidies and electricity tariffs are also being discussed.
Also another banking source said the loan request could not be approved until October.
The Federal Ministry of Finance directed queries to the World Bank. In a statement, the lender said discussions were at an advanced stage, but confirmed that it had not presented the loan to its board.
Of major interest and importance is the plan of the federal government of Nigeria to assemble and plan the much needed fiscal resources for a reform that will be of great and immense benefit to the masses and also embark reforms that will help ensure a better and improved recovery, th statement explained.
The country’s strategy of sustaining the Naira has become a very expensive and costly one especially in the wake of the drastic fall in the nation’s oil price as it often relies on the oil for 90 percent of its foreign exchange [forex]. The Federal government has devalued the Naira twice in the year 2020 alone, however according to the sources this move is not sufficient alone for the World Bank to approve the loan request from the Nigerian government, which it stated that they wanted a more complete and encompassing reform of the Naira policy.
The Nigerian government also stated that it has removed the fuel subsidies through a “floating cap” but then the World Bank believed that the process was not amply transparent.
While the Nigerian Government has continued to explore various ways through which it can curtail and avoid the looming case of recession as predicted by the World bank, it must also ensure that it adopts and promotes homegrown economic policies especially ones that has to do with the sustenance and promotion of policies that will help the small scale businesses to grow and thrive in the nation as this will go a long way in contributing a large chunk of fund to the nation’s treasure while it also reduces the over- dependency of oil exploration in the country.
By Marcus Amudipe