NIGERIA is to receive a World Bank loan of $1.5bn in late July to augment a recent $3.4bn handout got from the International Monetary Fund (IMF) aimed at enabling the government meet fund its 2020 budget in the wake of the global economic meltdown.
Following the collapse of the global economy in the wake of the coronavirus pandemic, Nigeria’s economy has virtually collapsed as the country cannot sell crude oil on the international market. As much as 95% of government revenue comes from the export of petroleum products and with a combination of a lack of buyers and a price collapse, Nigeria has been left without any revenue source.
On April 28, the IMF approved Nigeria’s request for a $3.4bn loan to help ameliorate the effects of the economic collapse brought about by the coronavirus pandemic. On April 6, Nigeria’s finance minister Zainab Ahmed, had applied for the loan to help fund the government’s 2020 budget after doing so from oil proceeds became impossible.
Under the terms of the loan the IMF granted Nigeria, the repayment period is five years, with up to two and half years being a grace period and the interest is 1%. According to Kristalina Georgieva, the IMF managing director, the fund has put in place policy tracking action and is watching the progress each country is making.
Now, this IMF loan is to be augmented with the World Bank, bringing to the total amount Nigeria has borrowed during the crisis to $4.9bn so far. Over the longer term the World Bank is working on packages that could provide more than $3bn to Nigeria that is facing her greatest fiscal crisis in 40 years.
Shubham Chaudhuri, the World Bank’s Nigeria country director, said: “We were hoping to present to our board by late July or latest early August, because the government will need the finance. The immediate challenge is a fiscal one, how does the government marshal the fiscal resources to keep basic government functions going?”
Ms Ahmed said Nigeria’s economy could shrink by as much as 8.9% this year and the World Bank expects Nigeria’s oil revenues could fall by a third or possibly more than half. Marco Hernandez, the World Bank’s lead economist on Nigeria, said even if the outbreak were contained, the situation was unprecedented and shocking.
Mr Hernandez warned that Nigeria’s 2016 recession sent 13m people into unemployment and this crisis might be much more pronounced. World Bank loans often have conditions attached to them, including reforms that governments must enact to secure the money but it is not yet clear what the Nigerian government has been asked to do to secure this one.