Nigeria's $3 billion Loan Request From World Bank Suffers Setback

In June, the Minister of Finance, Budget and National Planning, Zainab Ahmed, stated that the World Bank will approve the first tranche of the $3 billion which Nigeria requested in August but that didn't happen. Nigeria was expecting between $1 billion and $1.5 billion as the first tranche.

The approval was supposed to be given during the World Bank's board of directors meeting, but the meeting didn't hold and has been delayed for about two months, as the World Bank is expected to hold another meeting either in September or October. Ahmed was certain that the approval - which necessitated Nigeria meeting some requirement - would be given Wednesday.

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"We have met largely all the conditions for the facility and we are on course. And the amount that we are raising in the first instance is $1.5 billion for the federal government and around September or October, we are hoping to get the facility that is meant to support the state and the amount is between $1 billion and $1.5 billion," the minister had stated.

But now, the month which Nigeria is expecting the complete batch is when the Bank would be meeting to approve the first tranche. This will delay the government's plan, as it intends to utilize the fund for its Economic Sustainability Plan. The government needs funds to stabilize the economy which has been negatively impacted by the COVID-19 pandemic. Other things on the government's to-do list are to protect jobs by financially supporting the private sector, micro, small and medium businesses.

Other Loans Government Is Depending On

The World Bank fund is just one of many financial support that the Nigerian government has requested in order to fund its Economic Sustainability Plan. FG said it is seeking about $7 billion, and financial sources listed by the government include the $3.4 billion received from the International Monetary Fund (IMF), $1 billion from the African Development Bank (AfDB), the African bank also issued $288.5 million COVID-19 loan to Nigeria. The government also stated that it will draw $150 million from the Nigeria Sovereign Investment Authority (NSIA).

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The IMF have already approved the $3.4 billion, after Nigeria requested 100% of its entitlement in IMF. These series of loans have increased the debt burden of the country, with debt service to revenue ratio causing Nigeria to use almost all its revenue to service loan, meaning, Nigeria uses about 96 kobo out of N1 to service debt in first quarter.

Note that the government is currently in a faceoff with the House of Representatives due to its cravings for Chinese loan and the contract terms signed between Nigeria and China, which created fears that the government could have transferred Nigeria's sovereignty to the Asian country - but it's all a misconception of the sovereign guarantee.