Distressed Nigeria turns to multilateral lenders for $3.5 billion in ‘soft’ loans

Africa’s biggest economy in talks with World Bank, AfDB as seeks to spend way out of economic crisis—a hint of Keynesian economics.

NIGERIA’S government is in talks for concessionary loans worth $3.5 billion from the World Bank and African Development Bank to help finance a planned record budget this year, Finance Minister Kemi Adeosun said.

While discussions are going on, a formal request hasn’t yet been made to the World Bank for $2.5 billion and the AfDB for $1 billion, Adeosun said by telephone on Sunday. The government plans to tie them to specific capital projects, she said.

Infrastructure projects such as roads, railways and dams are among the most common examples of capital projects.

A request hasn’t been made for assistance from the International Monetary Fund.

President Muhammadu Buhari’s government is seeking to spend its way out of an economic crisis triggered by a collapse in oil prices. Nigeria is Africa’s biggest oil producer and relies on crude for almost all its exports and two-thirds of government revenue.

Record budget

Buhari has proposed boosting this year’s budget to a record 6.1 trillion naira ($30.7 billion). Adeosun said on January 21 that authorities will borrow about $5 billion in external debt from multilateral agencies and the Eurobond market to plug record budget gap of 3 trillion naira.

Lawmakers in Nigeria’s parliament will begin deliberations this week on the 2016 spending plan, Adeosun said on Sunday. Authorities will begin non-deal roadshow meetings with investors to sound out a potential sale of $1 billion of Eurobonds in February, she said.

Nigeria has issued dollar bonds twice, most recently in 2013. Crude oil prices have dropped about 46% since June last year and were trading as low as $35.14 a barrel in London on Monday.

The West African nation’s economy probably grew 3.2% last year, the slowest pace since 1999, according to a Bloomberg survey of economists. (Bloomberg)

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