A couple of weeks after the Nigerian government urged the African Development Bank (AfDB) to fast-track its plan to give a $1 billion loan to finance Nigeria’s budget deficit, the executive directors of the bank have approved an immediate release of $600 million to Africa’s largest economy.
President of the AfDB and Nigeria’s former agriculture minister, Dr Akinwunmi Adesina, had last September during a visit to President Muahammadu Buhari in Abuja, announced the $1bn loan package at 1.2 percent interest rate to cover the deficits in Nigeria’s budget and help tackle the recession in its economy.
In a statement published on its website on Wednesday, the AfDB stated that the approval of the $600m loan, being the first tranche of the $1bn budget support loan earlier announced by Adesina, would help finance what it termed Nigeria’s Economic Governance, Diversification and Competitiveness Support Program (EGDCSP).
The bank also stated that the second and last tranche of $400m would be approved in 2017.
A portion of the statement read: “This operation is part of a two-fiscal-year (2016-2017) programmatic counter-cyclical fiscal support in a context where the Federal Government of Nigeria is implementing reforms to achieve efficiency in the business of government, combat corruption and promote diversification and competitiveness of the economy.
“It will help the government create fiscal space to facilitate a smooth implementation of the Government’s budget, support fiscal and structural reforms, and improve the targeting of social sector spending to protect the most vulnerable segments of the population.”
AfDB stated that the grant would also help Nigeria to quickly build a buffer of foreign exchange reserves, which would contribute to easing pressure on the foreign exchange market and stabilising the Naira.
It also noted that Nigeria’s recovery from economic recession was critical to the stability of neighbouring countries and the entire continent.
“We must think through innovative solutions to support our regional member countries in crisis situations like this,” AfDB President Akinwumi Adesina told the Board following the approval. “We must also provide them with the knowledge products they require to get back on track,” he added.
The loan approval may indeed give the President Buhari administration some relief as its ambitious proposal to borrow $30bn to revamp the economy was turned down by the Nigerian Senate on Tuesday.
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