Plans by the Federal Government to borrow billions of dollars from the World Bank to plug its budget deficit have run into delays as the international lender is demanding for further reforms from the government as a condition for any loan.
This came barely one month after the Presidency gave the Ministry of Finance its seal of approval to obtain the loan.
People briefed on the talks said the Ministry of Finance was now facing calls from the International Monetary Fund and World Bank to push through further reforms on the economy.
These discussions, they said, had held up any agreement on a loan from the bank, Financial Times reported on Monday.
They added that the World Bank had said it would not be able to disburse any loans until 2017 at the earliest because it “has not yet received the macroeconomic framework” needed for the discussions to progress, though the finance ministry disputes that.
The World Bank said it was “continuing its discussions” with Nigeria “on a range of critical reforms for restoring macroeconomic resilience” and “would determine, with the government, the most appropriate instrument to support the reform programme.”
It did not give a timeline for the discussions, expected to continue on the sidelines of the World Bank and IMF meetings in Washington this week.
“Although recent measures, including the adjustment of fuel prices and the move towards more flexibility in the foreign exchange market, are welcome, more are needed to ensure sustained economic benefits,” the IMF’s mission Chief for Nigeria, Gene Leon, said in a statement to the Financial Times.
He added that the Federal Government needed to “reduce domestic and external imbalances” and provide “greater clarity” on its macroeconomic policy direction.
The Minister of Finance, Mrs. Kemi Adeosun, had in April said that Nigeria planned to secure external financing for a budget shortfall now estimated at N1.8tn by the end of the third quarter.
She also said last week that the discussions with the World Bank were ongoing.
Apart from the World Bank, the government is also planning to take loans from other institutions such as the African Development Bank, Japan International Cooperation Agency, and Export-Import Bank of China.
This will include low-cost and long-term loans with interest rates of 1.25 per cent and maturity of 20 years.
The Federal Government has announced plans to issue about $1bn Eurobond later this.
According to the Presidency, the government is now waiting for lawmakers to approve the plans.
President Muhammadu Buhari had announced a N6.1tn ($19.4bn) spending plan aimed at stimulating the economy this year.
The economy contracted in the first two quarters as oil revenue plunged.
Buhari said he expected the Federal Government to raise about $5bn from the Eurobond market, multilateral and bilateral lenders.
The Debt Management Office had last month asked banks to place bids by September 19 if they wished to manage a $1bn Eurobond sale.
Adeosun told bond investors in London in June that Nigeria was close to securing about $3bn of funding from the World Bank and the African Development Bank.