Nigeria Seeks Over $3 Billion From World Bank, AfDB, Bonds

Nigeria is talking to the World Bank and African Development Bank for $3 billion of loans before the West African nation determines how much it will raise from Eurobonds to help fund this year’s budget. 

“From the World Bank, we are hoping to get $2 billion,” Minister of State for Budget and National Planning Zainab Ahmed said in an interview Tuesday in the capital, Abuja. While the African Development Bank in November disbursed $600 million of a $1 billion loan, Nigeria wants the Abidjan-based lender to top up the remaining $400 million. “We are talking to see whether they can up it to $1 billion,” she said.

Nigerian lawmakers are debating the 2017 budget of a record 7.3 trillion naira ($23 billion) that the Budget Ministry says will help to boost an economy that shrunk 1.5 percent last year, the first contraction since 1991. That’s after lower prices and production of oil, its biggest export, and shortages of both foreign currency and power weighed on output.

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The government raised $1 billion of Eurobonds in February and a further $500 million last month to finance projects approved in the 2016 budget. It will return to the market for a new fundraising round for this year’s spending plans, Ahmed said.

Yields on the bonds sold in February and maturing in 2032 rose 2 basis points to 7.23 percent on Tuesday, paring the drop since being issued to 65 basis points.

More Borrowing

“We should be able to do higher than what we borrowed in 2016,” she said. “It will be determined by how much we get from the World Bank and African Development Bank because that’s a lower rate. Our preference is always to get the lower rate first.”

President Muhammadu Buhari announced a four-year economic plan last month that targets 7 percent annual economic growth and 15 million new jobs by 2020 by expanding oil output, opening farmland and increasing investment in power, roads, rails and ports. The World Bank said it welcomed the blueprint and is discussing “the most appropriate lending instrument” to support the plan with its partners.

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Nigeria’s fiscal authorities want the central bank to lower the benchmark interest rate from a record high of 14 percent, where it’s been since July, Ahmed said. This will help the government to renew domestic debt at more favourable costs and to boost the economy, she said.

While the government may increase foreign borrowing to 46 percent of total planned debt of 2.32 trillion naira for 2017, more than half of it will still come from the domestic market, according to Buhari’s December budget speech.

Nigeria’s inflation rate fell for the first time in 16 months in February, dropping to 17.8 percent. This is still well outside the target band of 6 percent to 9 percent.

“The economy is turning around, inflation has begun to go down, growth is inching up,” Ahmed said. “First-quarter results will be announced as well, and there is also improvement,” Ahmed said. The central bank will have room to lower rates with the changes, she said.

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