Govt, World Bank discuss $1b power sector loan | Nairalaw

The Federal Government and the World Bank Power Sector team
yesterday met on the possibility of Nigeria accessing a $1 billion
Performance Based Loan (PBL) from multilateral institutions.

Finance Minister Mrs. Zainab Ahmed dropped the hint at a joint
news conference with Central Bank of Nigeria (CBN) Governor Godwin
Emefiele at the end of the 2019 World Bank/International Monetary
Fund (IMF) Spring Meetings in the United States.

The minister cleared the air on fuel subsidy, saying removing it
is not on the cards. The International Monetary Fund (IMF) has been
advocating the removal of fuel subsidy to free more money for
infrastructural development. The Federal Government believes doing
so will increase the burden of the poor.

Mrs. Ahmed said: “We met with the World Bank Power Sector team
and discussed the way forward on the proposed $1 billion 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 spoke of 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 some projects in
the water sector.

She pointed out 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, Mrs Ahmed 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 good advice, but in Nigeria, we do not have any
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.”

On Brexit, Emefiele attributed ongoing Brexit controversy in the
United Kingdom (UK) to immigration and trade opportunities.

The CBN governor said: “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 United States (U.S.) For instance, China is
Nigeria’s largest trading partner, followed by the U.S. And I had
imagined 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 expect, would
naturally be positive.”

Giving an overview of the meetings, Mrs. Ahmed said they
provided an opportunity to review developments in the global
economy, examine emerging and associated risks. They also offered
potential policy menu to ameliorate the situations, going forward,
she added.

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, such as uncertainties over Brexit, all
resulting in policy uncertainty.

In terms of fiscal policy, Mrs. Ahmed said government debts to
Gross Domestic Product (GDP) ratios had 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, such as aging populations, declining birth rates and
raising barriers to immigration weigh in.

Mrs. Ahmed said the key takeaway was 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 through
borrowed resources.

The minister said this arose partly due to the delay in
completing the 15th general review of quotas, adding that 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.”

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

She said Nigeria used the Spring Meetings to showcase what the
government had been doing in human capital development.

The minister said: “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 programmes 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. Nigeria endorsed the Coalition Principles
as one of the founding members.”