FG in talks with ADB for $1bn loan

The Federal Government is in talks with the African Development Bank (AfDB) for a $1 billion loan to help cover its 2016 budget deficit, the Finance Minister, Mrs Kemi Adeosun said on Monday.

According to Reuters’ report monitored by Business247 news Online, Adeosun said the loan would be concessional and carry an interest rate of 1.2 percent.

“We are talking with AfDB for a $1 billion budget deficits finance support,” Adeosun told reporters following a meeting with AfDB head Akinwumi Adesina and the Vice President, Yemi Osinbajo.

The nation’s economy is in recession for the first time in more than 20 years, largely due to low price for oil, sales of which generate 70 percent of government revenues. Attacks on energy facilities in the Niger Delta have meanwhile cut crude production by around a third since the start of the year.

Nigeria has been struggling to fund a record 6.06 trillion naira ($18.6 billion) 2016 budget that aims to stimulate growth by tripling capital expenditure.

This medium reported on Sunday that the Federal Government would play host to the President of the African Development Bank (AfDB) as he was expected in the country for a three-day official visit to hold special session with the Nigeria economic managers on how to stimulate the nation’s economic recovery.

This was according to a statement on AfDB website which explained that he would meet with President Muhammadu Buhari, the Minister of Finance, Mrs. Kemi Adeosun and the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emiefele, to discuss on how to find ways of strengthening the economy and creating jobs for the teeming unemployed youths.

The statement said AfDB boss will be in Nigeria from Monday till Wednesday and that will be his  first official visit to Nigeria since he was appointed in 2015.

The AfDB president will meet government/policy-makers, the private sector and development partners to discuss the challenges facing Nigeria and highlight the AfDB’s commitment to further strengthen its partnership with Nigeria.

It would be recalled that Adesina, late last month advised African governments to boost tax revenue and steer clear of international borrowing as the region is faced with worst economic slump in more than a decade.

The AfDB chief in a report by the Financial Times said that the call became necessary because he expected the downturn in Africa, which has resulted in the decline in commodity prices as well as the slowdown in China, to last for, at least, the next three years.

He acknowledged that Africa was facing a debt challenge but stressed that “there has to be a lot more fiscal consolidation”.

Adesina said that expanding the tax base and improving the efficiency of tax administration would be the easiest ways to boost public finances.

According to him, the tax-to-GDP ratio in sub-Saharan Africa was about 14.5 per cent, compared with more than 30 per cent for most developed nations. “So, a lot more needs to be done to expand the tax base in Africa. Today it’s about $500 billion a year [for the region], which is much better than it used to be, but we need to expand that.”

The AfDB chief said not only was it risky for governments to borrow overseas because many African currencies were weakening and the US Federal Reserve appeared set to raise interest rates again this year, but also unnecessary.

“Instead of African countries running off to raise a lot of Eurobonds, I think there’s huge amounts of capital available more locally that we must tap for Africa’s development,” Adesina said, adding that borrowing should only be undertaken to finance projects that enhance economic growth”.

Caption:

From left: President, African Development Bank, Dr. Akinwumi Adesina; President Muhammadu Buhari and Minister of Finance, Mrs Kemi Adeosun during the ADB delegate to the Presidential Villa Abuja on Monday.