Nigeria’s bid to secure international bailout loans to fund the 2017 budget deficit has hit a deadlock because the economic team is yet to submit the economic recovery plan as requested by the World Bank and African Development Bank.
The government has been in loan bidding and negotiation with the World Bank for over a year. The government had promised potential lenders that it would present its proposed reforms to make the economy more resilient and attractive to investment by the end of December.
The reason for the plan submission delay by the government remains unclear. The finance minister Kemi Adeosun has reportedly refused to comment on this.
This has serious implications and the possibility to cast a huge doubt on the claim that the 2017 budget is predicated on “intent to revived the economy” and the much-needed infrastructure projects planned for this year, including new roads and improvements to power infrastructure. Failure to secure these loans, and to present a reform program, could also deter some investors from Nigeria’s planned $1 billion Eurobonds sale in March
This could also deter foreign investments from Nigeria’s planned $1 billion Eurobonds sale in March.
Presently, Nigeria requires assistant in funding a budget deficit of 2.2 trillion Naira ($7 billion) for 2016 and to help fund a record budget of 7.3 trillion Naira for 2017 which is aimed at stimulating the economy.
Nigeria has also been in talks with China and other international banks and funding agencies to borrow more funds but apart from a $1 billion loan from the African Development Bank, at a rate of 1.2 percent. The figure of the amount Nigeria is seeking to borrow from the World Bank is not yet known; as no figure has been made public so far.
The African development bank has indicated it will not release the second half of Nigeria’s $1billion approved loan until the economic recovery plan is ready and presented. $600 million of the $1billion was remitted to Nigeria in November 2016.
The Central Bank of Nigeria as supported by President Muhammadu Buhari is adamant about its flexibility to allow a free fall of the Naira and bent on keeping the Naira rate to the dollar at 40 percent above the unofficial – or parallel – market rate, which has boasted the scarcity of the dollar on official channels. This action has placed the power to navigate the situation into the hands of the black-market; making a few benefit from the sufferings of the majority while shutting down the whole economy.
This has also made investors reluctant to commit to new projects as they expect the central bank will have to devalue the Naira eventually as oil production has been hit by an insurgency in the Niger Delta oil hub.
The central bank has also imposed hard currency curbs making impossible the import of almost 700 goods, which has many plants and factories to close down. Just this week, the Dangote tomato factory was shut down due to a lack of FX availability.
There is no tangible evidence proving that the government is serious and making any effort to salvage the economy from plunging further downwards. Businesses continue to struggle to cope, organisations are continuing the massive worker layoff. It is still unclear what the government hopes to achieve with it strict FX policies when things are already so bad.
A look at the 2017 budget shows that president Buhari and his economic team are creating a new set of corruption for Nigeria.
The budget is extremely bogus, lacks any reflections of the stated intent of restructuring the economy for recession recovery. The 2017 budget makes absolutely no sense.
A budget is a projection plan that is based on a strategic framework were the inputs has a direct correlation with the outputs to achieve an intended goal. This 2017 budget shows a clear mismatch between the inputs and outputs, thus, creating a lack of confidence that this government can achieve any positive outcome in the economy. If the budget is ready and waiting for international loan approvals, yet the economic recovery plan which the budget was supposed to be predicated on is not ready, on what basis was this budget developed?
The only thing apparent in this situation is that Nigeria is acquiring loans to fund a bogus running cost of government and to continue the culture of looting.