…says no talks for IMF facility
Marrakech, Morocco|| Wale Edun, minister of finance and coordinating minister for the economy at the weekend confirmed ongoing talks with the World Bank for a $1.5 billion concessionary loan to support budget funding and signaled that the money will likely come in soon.
Edun, who confirmed the development during a press meeting on the sidelines of the annual meetings of the World Bank and International Monetary Fund (IMF) in Marrakech, Morocco, said the loan request will possibly be discussed as the federal executive council meets on Monday, October 16.
The minister said talks on the loan request had progressed for some time now and that it will come with a near zero interest rate, dousing concerns around rising debt service obligations.
He said: “Talks with the World Bank on $1.5 billion budget support, is correct. The World Bank is the number one multilateral development bank for helping developing countries fund their own projects and programmes. It has free money through the International Development Association (IDA).
“It has this for the poorer countries and right now I think we qualify as one of the countries that are almost in the normal window of the World Bank funding but also some concessionary IDA funding.
“That means that effectively, the interest rate will be zero. Therefore, there is no stigma attached to qualifying for World Bank funding to help finance development.
In this particular case, it’s long been in the pipeline, and we are hoping that that funding will come through soon. A lot of hard work is being done. There’s a federal executive council meeting on Monday that should be able to discuss this as well as other initiatives for financing of reasonable terms.
“We’ve talked about the high costs of money, but the World Bank money is the cheapest.”
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In 2020, the World Bank also approved a $1.5 billion credit facility for Nigeria to enable it bridge the budget funding gap for the pandemic year when the country faced a sharp fall in oil prices and the economy jumped into a difficult recession.
Nigeria equally secured a $3.4 billion facility from the International Monetary Fund (IMF) in emergency financial assistance under its Rapid Financing Instrument.
He, however, clarified that Nigeria is not discussing any loan programme with the IMF and has not asked the country to increase taxes.
“We have no loan programme in the offing with the IMF and so, I am not privy to where they proposed to us to increase our taxes and increase the interest rate.
“There is a fiscal policy and tax reform committee in place. It has nothing to do with the IMF, it is homegrown. We are into self-reliance, domestic resource mobilisation and that includes in no small part coming up with our own plans and ideas rather than having them imposed from outside by those who definitely know less than we do about our situation,” the minister stated.
Edun assured that regarding Ways and Means, the government will keep it to the statutory limit, and measures were already being taken to forestall the “situation of ballooning or seemingly out of control borrowing from the central bank.”
He acknowledged that debt service as a proportion of revenue was way too high and that the response has been an attempt to improve both oil and non-oil revenues.
According to him, the government is encouraged that ongoing reform efforts are being globally acknowledged and applauded as capable of putting Nigeria on the path to economic recovery.
Read also: Updated: Nigeria, World Bank in talks for $1.5bn budget support fund
Meanwhile, at the annual meetings, Edun highlighted how longer interest rates have amplified debt service burdens and capital flow reversals in the 22 Sub-Saharan countries, and pushed for continued multilateral cooperation to tackle debt challenges which supports the G20 Common Framework and the Global Sovereign Debt Roundtable.
Edun, who is now the chair of African governors at the World Bank and IMF, emphasised the strengthening of the IMF Global Financial Safety Net to best serve the needs of the membership, especially the more vulnerable ones.
He equally argued on the need for a robust framework that would enhance global liquidity for the purpose of settling balance of payment, fiscal crisis and reduce the cost of borrowings, while reflecting on the increasing poverty level in the Low-Income Countries (LICs) and called for a robust IDA 21 Replenishment.
While he commended the G20 Road Map on Crypto assets which provided a global framework on crypto assets regulation and supervision, he pushed that the implementation should be left with the central banks.
