Thursday, May 6, 2021

$1.5 Billion Loan: World Bank expresses reservations

The bank queries how Nigeria intends to fill a $15 billion hole with $1.5 billion budget loan.

• December 11, 2020
David Malpass
World Bank president, David Malpass (Photo Credit: Aljezeera)

The World Bank is still considering the viability of Nigeria’s $1.5 billion budget support loan request , Shubham Chaudhuri, the bank’s Country Director for Nigeria said on Thursday.

Presenting the World Bank Nigeria Development Update (NDU) for December to the media, Mr. Chaudhuri queried the sustainability of the country’s economic plans beyond 2021.

He also took stock of recently implemented reforms and proposed policy options to mitigate the impact of COVID-19 and foster a resilient, sustainable and inclusive recovery.

Mr. Chaudhuri said that the loan request was taking so long because, irrespective of the bold actions taken by the government in the form of reforms to cushion the effects of the pandemic, the bank still had its reservations.

“I think the way that our board and our shareholders have approached this budget support, is really to say, has the country that is requesting the support done all it can to help itself?

“Think of it this way, when you have say a 10 or $15 billion hole, $1.5 billion is just a little bit of that, the question is how is the rest of that hole being made up?

“What is the sustainability in 2021 and beyond? And that is why we are thinking about the overall prospects going forward, in terms of the macro adequacy and the flexibility and exchange rate management.

“That is why our shareholders and our management are still saying we recognise how much Nigeria has done, but for this $1.5 billion to really be a part of the larger effort to put Nigeria on a sound macro-fiscal footing going forward, there needs to be a little bit more,” he explained.

The country director, however, said that the $1.5 billion slated for presentation to the Bank’s board for approval on December 14 was not the $1.5 billion for budget support, but two separate $750 million credits to support state government efforts.

He added that one of them was for the state’s fiscal resources, but under a performance based mechanism.

“So, one is additional financing for the State’s Fiscal Transparency Accountability and Sustainability (SFTAS) programme for results.

“The other is the Nigeria COVID-19 Action Recovery and Economic Stimulus (CARES) Programme, which is meant to support the states towards protecting livelihoods, enhancing food security and supporting local economic activity.

“So those are the two operations that are being considered by our board on Monday.”

As for the bank’s portfolio investment in Nigeria, he said after the $1.5 billion states support credit, it would amount to $11.5 billion dollars.

“Yes, we are providing credits and not grants to support the government’s budget, but it is highly concessional, usually 20-30 years maturities, 10 years grace period and at highly concessional rates of about 1 to 2 percent.

The World Bank chief said that in active disbursements, the bank had disbursed seven billion dollars as at July 2018.

He added the bank’s board, in July, also approved $500 million for the Adult and Girls Initiative for Learning and Empowerment (AGILE) programme, under the Global Financing Facility.

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