Nigeria will this week conclude talks with the African Development Bank (AfDB) for a $1 billion loan with which to finance its N6.06 trillion 2016 budget.
So far, the budget performance is said to have recorded a 35 per cent reflection of low revenue from oil, the country’s main income source.
Confirming this, Finance Minister, Kemi Adeosun , disclosed that the third quarter would see government more engaged with more international financial institutions for a life line so long as its revenues shrink on account of low oil incomes.
She said the possibility of approaching World Bank for similar talks is not ruled out, adding that “there is nothing wrong in borrowing wisely.”
But this runs contrary to government’s earlier disagreement with the IMF position that Nigeria should take more drastic measures towards revamping its down economy.
The Fund’s advice included: devaluation of the naira, liberating international trade and allowing its officials to be involved in restructuring, as to be able to advance loan to the country.
But the government had then remained opposed to these terms, and rather opted to guide the exchange rate of the naira on the argument that the country is not export-oriented, and that allowing naira to be determined by market forces will cause spiral inflation.
Sources said the reversal of government’s stance was after some heated arguments within and outside supported refining and adopting the IMF position.
This must have been the reason for sourcing of loans from diverse institutions, one of them being AfDB, said an economist.
But AfDB officials said the talks with government officials would help the government push reforms in critical sectors, especially, revenue generation and spending.
Said Ousmane Dore, AfDB Country Director: “The African Development Bank has received a request for budget support operation in the amount of $1billion.
“Certainly, the money has yet to come but the last mission just concluded last Friday, and we have to proceed to the next step of the process which will probably be negotiation, before we can take the programme to the board for approval.”
The bank said it is in tune with the fact that of the N6.06 trillion budget, government had envisaged revenues of up to N3.855 trillion, leaving an expanded fiscal deficit to N2.2 trillion, amounting to about 2.14 percent of GDP.
The government had also planned to finance the deficit mainly through a restructured borrowing plan of up to N1.8 trillion, which favours more of external than domestic borrowing to check crowding out the private sector.