Nigeria’s Recession May Last Longer …. As Govt’s Efforts to Secure Foreign Loan Stutter

President Muhammadu Buhari’s efforts to secure foreign loan to help the country recover from the current recession may have suffered a major setback.
According to a report by Reuters, quoting a source close to the matter, one of the banks approached by the Nigerian government has rejected its request, because it has not submitted the required economic reform plans.
The federal government has been in loan talks with the World Bank for a year. It had told the lender it would present its proposed reforms to make the economy more resilient and attractive to investment by the end of December, according to Western diplomats and a Nigerian official who declined to be named as they are not authorised to speak publicly.
But this has not happened and as a result of the delay, which the government has not explained, the Washington-based bank has not been able to consider a loan yet, the sources said.
Finance minister, Kemi Adeosun and the World Bank declined to comment.
Reuters also reported the president of the African Development Bank (AfDB), Akinwunmi Adesina, as saying on the sidelines of the World Economic Forum in Davos, Switzerland that the bank is holding back the second tranche of a $1 billion loan for Nigeria.
“We are waiting for the economic policy recovery programme and the policy framework for that,” Adesina reportedly said, without specifying when the AfDB had expected to receive the reform plans.
Nigeria has said it is seeking to borrow $4 billion in total from the World Bank and other foreign institutions and $1 billion through Eurobonds to plug a yawning budget deficit and fund badly needed infrastructure projects.
Nigeria’s economy is still reeling under the impact of the sharp fall in crude prices since 2014 and the Buhari administration has been struggling to drag the nation out of its first recession in 25 years.
It is unclear why the government has not submitted reform plans to the international lenders. The funding deadlock could throw into doubt badly needed infrastructure projects planned for this year, including new roads and improvements to power infrastructure.
The failure to secure the funds, and to present a reform programme, could also deter some investors from Nigeria’s planned $1 billion Eurobonds sale in March.
A Nigerian financial source said the government was working with a consultancy firm on putting together a package of proposed reforms. The source, who declined to be named as the matter is confidential, did not elaborate.
The country needs money to help plug a budget deficit of 2.2 trillion naira ($7 billion) for 2016 and to help fund a record budget of 7.3 trillion naira for 2017, which is aimed at stimulating the economy.
For this purpose, the government has been holding talks with various institutions and China over the last year to borrow funds, but apart from a $1 billion loan from AfDB, at a rate of 1.2 percent, nothing has been made public.
The Abidjan-based AfDB has paid out an initial $600 million in November but is awaiting the economic reform proposals before it disburses the rest of the money.