The Federal Government has secured a first installment loan of $1 billion from the African Development Bank (AfDB) to meet part of the deficit in the 2016 budget.
The money is coming to the Federal Government at an interest rate of 1.2 percent and it’s expected to be shored up by the bank to the tune of $4.1 billion by the end of fourth quarter of 2017.
Also, barring any unforeseen circumstance, Akinwunmi Adesina, AfDB President, explained that total loan to be given to Nigeria may accrue to $10 billion by 2019.
Adesina made the disclosure on Monday shortly after he met with Vice President Yemi Osinbajo and other members of the Economic Management Team at the Presidential Villa, Abuja.
Beyond the initial funds which came into government coffers through the Treasury Single Account (TSA), it is believed that about $3.5 billion, approximately N1.3 trillion, would be required to effectively fund the deficit in the budget.
“We are looking to consider for an award of $1 billion loan to help deal with deficit in the budget.
“In addition to that, there are other challenges that the economy has which is in terms of diversifying and deepening the level of diversification in critical sectors, especially in agriculture, solid minerals, manufacturing as well as industrial sector. These are key sectors, so the bank is going to provide in total between 2016 and 2017 $4.1 billion to Nigeria in various sectors, cutting across power, infrastructure to agriculture and for the private sector, the SMEs financing and lending,” he said.
In the real sector where intervention is also required, AfDB intends to support the Development Bank of Nigeria (DBN) with $500 million loan, which will help to provide cheap financing for estate developers.
Adesina disclosed that $500 million will be provided for youth and entrepreneurial development, including the provision of $100 million to the Bank of Industry (BoI) to help lending to small and medium size enterprises.
Addressing State House correspondents, he said, “I expect that our portfolio in Nigeria will not decrease, it will actually grow, we expect to invest in Nigeria by 2019 a total of $10 billion.
“Let me just say that the issues that we think are important is the need to further deepen the diversification of the rest of the economy and make sure of the macro-economic stability as well as fiscal stability in the country. We have asked for the need for better synergies between the macro-policy side and monetary policy side and also the fiscal policy side of the economy.
“We also recognise that power is perhaps the most important challenge that is driving inflation in the country. So we expect in our portfolio this year to invest a total of 1,400 megawatts of projects to focus on the energy sector and by 2017 we plan to invest in 1,387 megawatts of project for the sector.
“We discussed with the vice president and minister of finance about how to invest in areas of women and youths employment in the country as well as to look for opportunities to support access to finance by supporting the Development Bank of Nigeria (DBN) with $500 million which will help to provide cheap financing for the real sector that the country wants to grow.
“We are also providing $100 million to the Bank of Industry (BoI) to be able to lend to small and medium size enterprises. We also want to finance the Bank of Agriculture.
“So all in all, I want to say that we are not fair weather friends of Nigeria; we are here to provide strong support to the Nigerian government”.
On the recession in the country, he acknowledged that Nigeria was going through hard times owing to the depletion of resources which accrues from crude sales.
“It is very important for me to be here and to talk to the Nigerian government about the challenges and opportunities that are in Nigeria.
“I think the times are difficult, there is no doubt about that, but I want to commend the government for being bold in taking the right decisions.
“I think that the fact that the price of crude oil has gone down is a big challenge because you have 98 percent external forex revenue coming from the sector,” the AfDB president added.
Meanwhile, Kemi Adeosun, Minister of Finance, who facilitated the borrowing plans, described the gesture as a great relief to the government and the economic management team.
She said the loans will be judiciously used to impact on Nigerians, especially on agriculture, youth empowerment and SMEs’ boost, among others.
“It’s a great relief to us in the economic management team and there is synergy between what we are trying to do and what the AfDB repositioning under Adesina is trying to focus on.
“Most of the sectors, the specific programmes that the bank has are the very areas that we want to focus on the economy and as Adesina said we are looking unto them for $1 billion budget support but beyond that there are lots of loans and initiatives around agriculture, job creation, solid minerals, women empowerment and women’s access to finance”.
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