World Bank delays giving Nigeria $1.5 billion loan

The World Bank has delayed in approving the long-anticipated $1.5 billion loan for Nigeria as scheduled in August due to concerns raised over reforms, according to people familiar with the matter.

The World Bank said it was not convinced about the economic state of Nigeria as the country heads towards its greatest financial crises in 40 years. It was reportedly stated that Nigeria’s representatives were supposed to present the loan to the World Bank loan for approval in August, but the loan is yet to be secured as both parties are still in talks over the loan.

“They are not convinced about the reforms,” a person familiar with the matter said. All sources familiar with the matter declined to reveal their identities as the matter is still in talks.

Denial or delay in financial assistance from multilateral lenders could leave Nigeria battered by a declining economy caused by derailing crude oil prices, and unable to finance its 10.8 trillion naira ($28.35) billion budget. According to the central bank, Nigeria still has a balance of payments gap of $14 billion.

The World Bank only grants loans strictly on grounds of reforms. Although it is yet to outline any specific demands, the World Bank previously said it was “recommending” a more favorable flexible rate. The discussion also includes fuel subsidies and electricity tariffs.

In a statement, the World Bank said discussions were still ongoing and had gotten to an advanced stage, however, the loan was yet to be presented to the board.

“Of particular importance are the steps the government is taking to marshal the need of fiscal resources for a pro-poor response to the crisis and undertake the reforms that will help ensure a robust recovery,” the statement read.

According to a source from the World Bank, the loan might be delayed to October this year. The World Bank is not convinced that the Federal Government and Central Bank of Nigeria are committed to putting credible mechanisms in place to ensure efficiency in the allocation and use of the loan to properly finance Nigeria.

Both the World Bank and the International Monetary Fund (IMF) have been very strict regarding the multiple exchange rate policy of the Nigerian government. According to the two organizations, the policy can distort the economy and create more room for corruption and arbitrage amongst currency speculators.

The falling oil prices have also put pressure on the country’s external reserve and foreign exchange (Forex) market. Also, the Central Bank’s policy of stepping in to help the naira has become costlier as oil prices continue to crash. Nigeria relies 90% on oil for its foreign exchange market.