Issues in Nigeria’s quest for $1bn loan from World Bank to improve power

The federal government and the World Bank Power sector team have had discussion on the possibility of accessing a $1 billion new line of Performance Based Loan (PBL) from the multilateral institutions. DAVID AAGBA reports.

The loan deal

Nigeria’s delegation to the recently concluded 2019 IMF/World Bank Group Spring Meetings. Finance Minister, Mrs. Zainab Ahmed leader of the delegation shouldered the responsibility of negotiating the deal.

The birth of the loam deal was made known at a joint press briefing held with the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele.

Other members of the delegation include Minister of Budget and National Planning, Senator Udoma Udo Udoma, Permanent Secretary, Federal Ministry of Finance, Dr. Mahmood Isa Dutse, Director General, Debt Management Office, Ms. Patience Oniha, Moses Tule, Director CBN and Isaac Okorafor, CBN Director, Corporate Communication and other senior officials of the CBN and Finance Ministry.

Way forward

Zainab said that the relevant Ministries, Departments and Agencies (MDAs) of government will be brought in to finalise the discussions in record time.

She said “We met with the World Bank Power Sector team and discussed the way forward on the Proposed $1billion Nigeria Performance Based Loan (PBL). We agreed to bring relevant MDAs together to ensure that we advance this operation in a timely manner. We will also discuss the Country Portfolio Performance of Nigeria which currently stands at $9.8 billion with the Nigerian Country team at the World Bank and how we could manage the portfolio for optimum results,” she said. Mrs.  Ahmed said there are plans by the Debt Management Office (DMO) to issue N15 billion Green Bond to fund agriculture, power, health and water amenities to make life better for the people, saying the Green Bond will be the second one and would be used to finance agriculture, power sector – mostly solar projects – as well as for some in the water sector.

Green project

She said that the projects for which the funds will be applied “must be green. They must be projects that are not contributing to carbon dioxide emissions to the society. The first green bond issuance was successful and all the projects that were scheduled to have been financed have been done and the projects are at various levels of completion.”  On fuel subsidy, she said there was no plan by the government to remove fossil fuel subsidies. “We are here to discuss with the global community on various policy issues. One of the issues that always come up, especially in the IMF Article IV is how we handle fuel subsidy. So in principle, the IMF would say fuel subsidies are better removed so that you can use the resources for other important sectors, which is a good advise, she said, adding, “ but in Nigeria, we do not have any immediate plans to remove fuel subsidies at this time because we have not yet designed buffers that will enable us remove the subsidy and provide cushions for our people.

“So there is no plan to remove fuel subsidy. We will be working with various groups to find out the best approach, if we have to. We discussed this very frequently at the Economic Management Team but what is the alternative? We haven’t yet found viable alternatives, so we are not yet at the point of removing fuel subsidies,” she added. On Brexit, Emefiele said the Brexit controversy going on in the United Kingdom is all about immigration and trade opportunities. “I would say that though Britain and Nigeria have trade relationship, but it is not as strong as what we have with China and the Untied States. For instance China is Nigeria’s largest trading partner, followed by the United States. And I had imagine that Britain comes quite low on the scale. So if you look at that, you would find that, in my view, there is not going to be any adverse consequences on Nigeria, but we are reviewing it to see the implication which I would expect would naturally be positive,” he said.

An overview

Giving an overview of the meetings, Mrs. Ahmed said the meetings provided an opportunity to review developments in the global economy, examine emergent and associated risks and offer potential policy menu to ameliorate the situations, going forward. She said  the meeting noted the slowing down of the global economy with a revised global growth from 3.3 per cent in 2019 to 3.6 per cent in 2020 mainly due to the heightened trade tensions, tightening financial market conditions, softening industrial activity, dampening global investment, monetary policy normalisation and geopolitical tensions like uncertainties over Brexit, all resulting in policy uncertainty. In terms of fiscal policy, Mrs. Ahmed said government debts to Gross Domestic Product (GDP) ratios have reached unprecedented levels and this limits the capacity of some of these countries to provide countercyclical policies; consequently, potential growth remains subdued in most of these countries partly as other factors, like aging populations, declining birth rates and raising barriers to immigration weigh in.

Key takeaways

She said the key takeaways were that the IMF requested for a mandate to pursue some negotiations with Governors for temporary financing options for ensuring that the Fund remains adequately resourced by maintaining the current resource envelope of the Fund through borrowed resources.  She said this arose partly due to the delay in completing the 15th general review of Quotas, saying while Governors endorsed this position, “we called for an ambitious timetable for the 16th General Review of quota which should result in increased quota shares for dynamic economies in line with their relative positions in the world economy, while protecting the voice and representation of the poorest members.

“I issued a statement calling for normalization of trade relations among the contending parties and called for concerted efforts to support multilateralism and avoid protectionist sentiments.” she said.

Human capital development

She said Nigeria used the Spring Meetings to show case what the government is doing in human capital development. “We have set up an inter-ministerial working group with representatives of the state governors and are currently piloting some initiatives in health, education and of course you are all aware of the social safety nets programs of the Federal Government where we have 15 million people already on the register. The World Bank Group was pleased with our efforts and promised to offer some assistance,” adding that “Nigeria endorsed the Coalition Principles as one of the founding members. and Isaac Okorafor, CBN Director, Corporate Communication and other senior officials of the CBN and Finance Ministry were in attendance .

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