The Federal Government has confirmed that it is in talks with the World Bank for a $1.5 billion budget support loan.
The government also said it would release a new Medium-Term Expenditure Framework later this month.
The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, made the disclosure on Saturday during a press conference at the ongoing World Bank/International Monetary Fund Annual meeting in Marrakech, Morocco.
A few months ago, the government said it would do less borrowing and focus more on domestic resource mobilisation to fund the budget, economic growth and development.
Edun said the $1.5 billion World Bank loan would be coming with a zero interest rate. Nigeria is currently battling with about N87 trillion debt, which the International Monetary Fund said was “manageable”, but noted that the interest payment was high for the country.
The minister said the new World Bank loan would be used to finance development, disclosing that the facility would be disbursed to Nigeria very soon.
He said, “On the talks with the World Bank on $1.5 billion budget support, that is correct. The World Bank is the number one multilateral development bank helping developing countries or funding developing countries, projects and programmes, and sectors. It has free money through the International Development Association. It is for the poorer countries and right now, I think we qualify as one of the countries that can borrow from the normal window of the World Bank funding, but also some concessionary IDA funding; and that means that effectively, the interest rate will be zero.
“So, therefore, there is no stigma attached to qualifying for the World Bank funding to help finance development. In this particular case, it has long been in the pipeline, and we are hoping that the funding will come through soon. A lot of hard work is being done. There is a Federal Executive Council meeting on Monday that should be able to discuss this, as well as other initiatives for financing on reasonable terms. We have talked about the high costs of money; the World Bank money is the cheapest”.
On whether Nigeria would seek loan forgiveness like Zambia, Edun noted that the country was still servicing its debt and, as such, not qualified for debt forgiveness.
“Zambia is restructuring its debt under an IMF programme that is called Common Framework, which is a framework within which countries that are creditors come together and agree on the basis of which to help a nation that cannot pay its debt. We thank God that Nigeria is not in that condition or situation now. We don’t need this type of financing at the moment”, Edun explained.
The minister, however, gave an assurance that the President Bola Tinubu administration would not engage in excessive borrowing, especially from the Central Bank of Nigeria.
He said, “Regarding the CBN Ways and Means loans, President Bola Ahmed Tinubu, even while campaigning as a candidate, President-elect and President, has a commitment not to go beyond the statutory limits. One of his priorities is the rule of law, sticking to agreements and sticking to the law.
“And so, his commitment is to come within the limit for Ways and Means, which essentially means overdraft borrowing from the central bank”.
The coordinating minister said the ongoing economic reforms were in order, noting that the administration would see them through.
According to him, the reforms are following a laid-down plan, which is being reviewed from time to time.
Edun added, “I will say there is a well laid out plan that is being constantly refined and this is being led and spearheaded by Mr President’s eight-point priority areas. In terms of debt service, the debt service as a proportion of revenue is too, and the response to that has been an attempt to improve both oil and non-oil revenues, and dollar and naira revenue.
“Mr President has re-jigged the security architecture, dealing with oil theft to increase oil revenues and at the same time, he has spent time meeting oil producers and encouraging them to invest further in production so as to boost oil revenues”.
Edun also said the government was making efforts to increase tax revenue, noting that TInubu had in August inaugurated a fiscal policy and tax reform committee that was already rolling out changes and improvements to the tax codes.
Meanwhile, he revealed that Nigeria emerged as the chair of the committee on the IMF executive.
He also spoke on climate financing and bonds.
The minister stated, “The Issue with climate change is that just like the sustainable development goals meant to be delivered by 2030, we are halfway through and less than 50 per cent of the goals have been met. There is a shortage of $500 billion per annum between now and 2030 to achieve those goals.
“So, it’s a complex and very ambitious target, and right now, it is not being met. It is the same with climate change; $1 trillion is needed to meet the target of climate change. Within that context, there is climate financing funding, which is relatively cheaper. Africa and the third world are responsible for three per cent of global emissions, and so there is a commitment to helping African countries with climate transition because they are not responsible for it. So, if you want them to move to net zero and make the sacrifices, you will have to help them and one of the ways is through climate financing and green bonds are one of the instruments I’m sure that we’ll be looking at using more climate financing options and green bonds as well”.
He also said the government would reduce waivers and tax exemptions, noting, “In terms of expenditure reduction, the subsidies are an expenditure item. We’ve talked about tax reforms, and that tax reforms will include looking at expenditures on taxes, waivers duties, and tax exemptions”.
