The African Development Bank (AfDB) has approved a $1 billion loan to cover the deficits in Nigeria’s 2016 budget, which is partly responsible for the economic recession.
The loan is at 1.2 percent interest rate.
AfDB President Akinwunmi Adesina broke the news to State House correspondents yesterday after meeting with Vice President Yemi Osinbajo and other members of the Economic Management Team (EMT) at the Presidential Villa, Abuja.
Stressing that Nigeria is the bank’s largest shareholder, he said its team was in Nigeria to support this country as it faces tough times.
He said: “We have a very strong delegation to meet the Vice President and the economic management team. The bank’s largest shareholder is Nigeria. It is very important for me to be here and to talk to the Nigerian government about the challenges and opportunities that are in Nigeria.
“I think the times are difficult, there is no doubt about that, but I want to commend the government for being bold in taking the right decisions. I think that the fact that the price of crude oil has gone down is a big challenge because you have 98 per cent external forex revenue coming from the sector.
“So it has created calibrations. I’m not going to go into the details of all the problems but what is important is what we are going to do about it.
“I’m not here to lecture the Nigerian government; I’m here to support very strongly. We have said that we are going to support the Nigerian government with the budget support to be able to deal with some of fiscal imbalance that they have. We are looking to consider for an award of $1 billion to help to deal with that particular deficit.
According to him, the bank would provide in total $4.1 billion to Nigeria between 2016/2017 for power, infrastructure, agriculture and for the private sectors, including the SMEs financing and lending.
He also said that he expected AfDB portfolio in Nigeria to grow to $10 billion by the year 2019.
“So, let me just say that the issues that we think are important are the need to further deepen the diversification of the rest of the economy and to make sure that the macro-economic stability as well as fiscal stability in the country.
“We have asked for the need for better synergies between the macro policy side and monetary policy side and also the fiscal policy side of the economy.
“And, of course, we also recognise that power is perhaps the most important challenge that is driving inflation in the country. So we expect in our portfolio this year to invest a total of 1,400 megawatts of projects to focus on the energy sector and by 2017 we plan to invest in 1,387 megawatts of project for the sector.”
Adesina said the bank also discussed with the Vice President and the Minister of Finance, Kemi Adeosun, how to invest in areas of women and youths employment as well as to look for opportunities to support access to finance by supporting the Development Bank of Nigeria (DBN) with $500 million which will help to provide cheap financing for the real sector that the country wants to grow.
According to him, the bank is also providing $100 million to the Bank of Industry (BoI) to be able to lend to small and medium size enterprises.
He said: “We also want to finance the Bank of Agriculture to be to reform itself to be able to get more financing.
“So, all in all, I want to say that we are not fair weather friends of Nigeria; we are here to provide strong support to the Nigerian government.
“Let me just say that Nigeria has tough times but Nigeria is not falling apart and when people talk about debt crisis, Nigeria is not in debt crisis. If you look at the fiscal deficit of this country with regard to the GDP, it is about 3 or 3.5 per cent. It is still way below the five per cent for the Fiscal Responsibility Act.
He added: “If you look in terms of the debt to the GDP ratio for Nigeria it is 15 per cent. So there is no debt crisis in Nigeria, what you have is liquidity problem and we are trying for the country to be able to drive down inflation and to be able to make sure we are working with the government to be able to provide incentives to the private sector.
“Because to come out of recession you need more than government; you need the private sector. So incentives are very important. The Finance minister talked about whole lot of incentives that they are going to give and think that is the right way to go.
“Nigeria will come out of this as a better, more diversified economy than it went into the recession.
The Minister of Finance, Kemi Adeosun, spoke of synergy between what the Economic Management Team is trying to do and what the AfDB is trying to focus on.
She said: “And most of the sectors, the specific programmes that the bank has are the very areas that we want to focus on the economy.
“And as Dr. Adesina said, we are looking unto them with $1 billion budget support but beyond that there are lots of loans and initiatives around agriculture, job creation or the youth, solid minerals, women empowerment and women’s access to finance, access to finance for the SMEs.
On what the interest rate for the $1 billion loan is, she said: “It is concession and it is way below two per cent, it is about 1.2 per cent.
“We are not over borrowing what we are trying to do is to ensure that this money we are borrowing we use it on the key infrastructure that will drive the economy,” Mrs. Adeosun said.
