Nigeria seeks $1.5 billion World Bank loan to ease forex shortage

Nigeria’s Minister of Finance, Wale Edun, has revealed that the government is considering getting a $1.5 billion loan from the World Bank to ease the dollar shortage in the country. 

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Telling quote

• Nigeria’s finance minister, Wale Edun, told Bloomberg:

“We’re hoping to get $1 billion or $1.5 billion from the World Bank. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.”

The details

• The shortage of dollars in the domestic market has created a backlog of demands from companies who need the greenback for their operations, leaving the black market as the only exchange alternative. 
• Edun estimates the backlog to be about $5 billion and expressed hopes of it getting cleared sooner if some of the economic reforms put in place succeeded. 
• He said,

“There is actually liquidity within the banking system, and there should be a way of getting the banks to actually help with that backlog, either on a spot or a forward-rate basis. “We believe that if we coral the dollars that are available, we can pay down that backlog almost in one fell swoop,” he added.

• The Minister added that the country is also looking to tap into the Eurobond market this year if rates fall.
• Edun said that the priority is to stabilize the naira through additional liquidity. He also shared that the government anticipates increasing oil production from about 1.49 million barrels to 1.78 million daily. 

Before now

• President Bola Tinubu’s decision to scrap Nigeria’s fuel subsidy and unify the exchange rate has been met with repercussions like a high cost of living and a 27-year high inflation rate of 28.9% last month. 
• The naira was also reported to be one of the worst-performing currencies in Africa, losing 55% of its value against the dollar.
• However, the Minister claims that these steps have been favorable. He said:

“What we’ve done with fuel subsidies, what we have done in terms of the foreign-exchange market reform, deserve support. “We’ve done enough, and we deserve to be rewarded imminently.”

• The Nigerian government has sought out several loans in its bid to strengthen the naira, with the most recent being a $1 billion concessionary loan from the African Development Bank. 

Zoom out 

• Considering Nigeria’s overdue short-term debt obligations among other factors, experts have projected a further worsening of the naira’s performance in 2024.