World Bank withholds $1.5b loan to Nigeria

NIGERIA got a caveat on Thursday to get approval for a $1.5
billion loan he is seeking from the World Bank. The reforms around
the naira must be strengthened by the Federal Government, the
financial institution is insisting.

According to a Reuters news agency report, World Bank Country
Director in Nigeria Shubham Chaudhuri gave the condition in Abuja
at the launch of the latest World Bank Nigeria Development Update
(NDU).

Mr. Shubham said the $1.5 billion loan request would be tabled
next week before the World Bank Board for approval.

Nigeria is requesting for the $1.5 billion facility to mitigate
the impact of low oil prices and the decimation of the economy by
the corona virus pandemic.

For any country to access World Bank loan, a number of
conditions are usually given. In the case of Nigeria, the World
Bank is demanding a set of reforms.

These reforms include: unification of the naira and removal of
fuel subsidy as conditions to be met before Nigeria can access
the$1.5 billion facility.

By withholding the $1.5 billion loan, Nigeria will be confronted
with a huge revenue gap that would make it difficult to finance the
revised ?10.8 trillion 2020 national budget.

In recent weeks, the value of the naira has come under pressure
because of dollar scarcity.

Shubham said: “We recognise how much Nigeria has done. There
needs to be a little bit more. The outset of the COVID-19 crisis
has made the task much more challenging and urgent because of the
severity of the economic downturn and the decline in fiscal
resources.

“By 2023, in our baseline scenario, Nigeria’s GDP per capita is
expected to be roughly similar to that of 2010. This means that
Nigeria would lose 14 years in per capita incomes.

“By contrast, if we compare Nigeria with the average of
middle-income economies worldwide, we find that other countries are
expected to lose around 7 years.

“In other words, while COVID-19 will hit incomes across all
countries, Nigeria is expected to suffer twice as much.

“Because Nigeria’s growth has been uneven and volatile, once we
adjust for inflation, we find that for Nigeria going back to 2010
is equivalent to going back to the 1980s.”

The World Bank Country director further explained that “before
COVID-19, rising food prices were already putting pressure on
inflation due to insecurity in the North, conflicts between farmers
and herders in the middle belt, and Nigeria’s closure of land
borders since August 2019. Then, on top of these, pandemic related
disruptions in value chains and production processes further
increased inflation.”

In a statement issued after the NDU release, the World Bank
raised the alarm that despite the current recession, Nigeria risks
sinking deeper into recession in the next three years.

The statement reads: “In the next three years, an average
Nigerian could see a reversal of decades of economic growth and the
country could enter its deepest recession since the 1980s.

“In the absence of measures to mitigate the impact of the
COVID-19 crisis, the number of poor could increase by 15 to 20
million by 2022.”

The report, however, advised that “this path could be avoided,
if progress in the current reforms is sustained and the right mix
of policy measures is implemented.

“It takes stock of the recently implemented reforms and proposes
policy options to mitigate the impact of COVID-19 and foster a
resilient, sustainable, and inclusive recovery.

The latest World Bank NDU projects that the economy could shrink
up to four per cent this year, following the twin shocks of
COVID-19 and low oil prices.

The pace of recovery next year and beyond, the NDU release said
“remains highly uncertain and subject to the pace of reforms.”

The World Bank director went further: “Nigeria is at a critical
historical juncture, with a choice to make. Nigeria can choose to
break decisively from business-as-usual, and rise to its
considerable potential by sustaining the bold reforms that have
been taken thus far and going even further and with an even greater
sense of urgency to promote faster and more inclusive economic
growth.”

The NDU acknowledged the measures taken by the government since
April, including the efforts to harmonise exchange rates, introduce
a market-based pricing mechanism for petrol, adjust electricity
tariffs to more cost-reflective levels, reduce non-essential
expenditures and redirect resources towards the COVID-19
response.”

The NDU report also highlighted the transparency in the oil and
gas sector and public debt as essential steps for a resilient
recovery.

World Bank Lead Economist for Nigeria and co-author of the
report Marco Hernandez also said: “Nigeria can build on its reform
momentum to contain the spread of COVID-19, stimulate the economy,
and enable the private sector to be the engine of growth and job
creation.

“It can also redirect public spending from subsidies that
benefit the rich towards investments in Nigeria’s people and youth
in particular, and lay foundations for a strong recovery to help
make progress towards lifting 100 million people out of
poverty.”

Looking ahead, the NDU pointed out five areas that would help
mitigate the effects of the crisis and support Nigeria’s
recovery.

They include: managing the domestic spread of COVID-19 until a
vaccine is available for distribution; enhancing macroeconomic
management to boost investor confidence; safeguarding and
mobilising revenues; reprioritising public spending to protect
critical development expenditures; and supporting economic activity
and access to basic services and providing relief for poor and
vulnerable communities.

NIGERIA got a caveat on Thursday to get approval for a $1.5
billion loan he is seeking from the World Bank. The reforms around
the naira must be strengthened by the Federal Government, the
financial institution is insisting.

According to a Reuters news agency report, World Bank Country
Director in Nigeria Shubham Chaudhuri gave the condition in Abuja
at the launch of the latest World Bank Nigeria Development Update
(NDU).

Mr. Shubham said the $1.5 billion loan request would be tabled
next week before the World Bank Board for approval.

Nigeria is requesting for the $1.5 billion facility to mitigate
the impact of low oil prices and the decimation of the economy by
the corona virus pandemic.

For any country to access World Bank loan, a number of
conditions are usually given. In the case of Nigeria, the World
Bank is demanding a set of reforms.

These reforms include: unification of the naira and removal of
fuel subsidy as conditions to be met before Nigeria can access
the$1.5 billion facility.

By withholding the $1.5 billion loan, Nigeria will be confronted
with a huge revenue gap that would make it difficult to finance the
revised ?10.8 trillion 2020 national budget.

In recent weeks, the value of the naira has come under pressure
because of dollar scarcity.

Shubham said: “We recognise how much Nigeria has done. There
needs to be a little bit more. The outset of the COVID-19 crisis
has made the task much more challenging and urgent because of the
severity of the economic downturn and the decline in fiscal
resources.

“By 2023, in our baseline scenario, Nigeria’s GDP per capita is
expected to be roughly similar to that of 2010. This means that
Nigeria would lose 14 years in per capita incomes.

“By contrast, if we compare Nigeria with the average of
middle-income economies worldwide, we find that other countries are
expected to lose around 7 years.

“In other words, while COVID-19 will hit incomes across all
countries, Nigeria is expected to suffer twice as much.

“Because Nigeria’s growth has been uneven and volatile, once we
adjust for inflation, we find that for Nigeria going back to 2010
is equivalent to going back to the 1980s.”

The World Bank Country director further explained that “before
COVID-19, rising food prices were already putting pressure on
inflation due to insecurity in the North, conflicts between farmers
and herders in the middle belt, and Nigeria’s closure of land
borders since August 2019. Then, on top of these, pandemic related
disruptions in value chains and production processes further
increased inflation.”

In a statement issued after the NDU release, the World Bank
raised the alarm that despite the current recession, Nigeria risks
sinking deeper into recession in the next three years.

The statement reads: “In the next three years, an average
Nigerian could see a reversal of decades of economic growth and the
country could enter its deepest recession since the 1980s.

“In the absence of measures to mitigate the impact of the
COVID-19 crisis, the number of poor could increase by 15 to 20
million by 2022.”

The report, however, advised that “this path could be avoided,
if progress in the current reforms is sustained and the right mix
of policy measures is implemented.

“It takes stock of the recently implemented reforms and proposes
policy options to mitigate the impact of COVID-19 and foster a
resilient, sustainable, and inclusive recovery.

The latest World Bank NDU projects that the economy could shrink
up to four per cent this year, following the twin shocks of
COVID-19 and low oil prices.

The pace of recovery next year and beyond, the NDU release said
“remains highly uncertain and subject to the pace of reforms.”

The World Bank director went further: “Nigeria is at a critical
historical juncture, with a choice to make. Nigeria can choose to
break decisively from business-as-usual, and rise to its
considerable potential by sustaining the bold reforms that have
been taken thus far and going even further and with an even greater
sense of urgency to promote faster and more inclusive economic
growth.”

The NDU acknowledged the measures taken by the government since
April, including the efforts to harmonise exchange rates, introduce
a market-based pricing mechanism for petrol, adjust electricity
tariffs to more cost-reflective levels, reduce non-essential
expenditures and redirect resources towards the COVID-19
response.”

The NDU report also highlighted the transparency in the oil and
gas sector and public debt as essential steps for a resilient
recovery.

World Bank Lead Economist for Nigeria and co-author of the
report Marco Hernandez also said: “Nigeria can build on its reform
momentum to contain the spread of COVID-19, stimulate the economy,
and enable the private sector to be the engine of growth and job
creation.

“It can also redirect public spending from subsidies that
benefit the rich towards investments in Nigeria’s people and youth
in particular, and lay foundations for a strong recovery to help
make progress towards lifting 100 million people out of
poverty.”

Looking ahead, the NDU pointed out five areas that would help
mitigate the effects of the crisis and support Nigeria’s
recovery.

They include: managing the domestic spread of COVID-19 until a
vaccine is available for distribution; enhancing macroeconomic
management to boost investor confidence; safeguarding and
mobilising revenues; reprioritising public spending to protect
critical development expenditures; and supporting economic activity
and access to basic services and providing relief for poor and
vulnerable communities.