Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, has disclosed that the Federal Executive Council (FEC) has given its approval for a $1.58 billion loan request, one day after he confirmed that the federal government was in the process of securing the loan.
The minister explained that the approved loan request consists of two components: $1.5 billion from the World Bank and $80 million from the African Development Bank (AfDB).
He further elaborated that the $1.5 billion from the World Bank will be channeled through the International Development Association (IDA), a branch of the World Bank that extends interest-free loans to low-income nations.
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“We also approved today the application for financing from the World Bank. And in particular, the International Development Association which is really the virtually free or zero interest lending arm or financing arm of the World Bank,” he said.
“The total is $1.5 billion. And the background is just as you heard from the Minister of Planning and Budget.”
Edun on Saturday assured that the loan would come with a near-zero interest rate, alleviating concerns about escalating Nigeria’s debt service commitments. He clarified that there would be no negative connotations associated with obtaining World Bank funding to support developmental projects.
Edun noted that the loan request is significant as it arrives at a time when borrowing costs are increasing, primarily due to developed nations hiking interest rates and implementing tighter monetary policies to combat inflation.
“What that means is that interest rates for everybody else, become not just high but very painful, if not on (sic) affordable within that context,” he said.
Edun said the World Bank is willing to lend to Nigeria because of some tough policies made by President Bola Tinubu. This loan is expected to support Nigeria in managing its finances, especially the nearly $7 billion backlog in FX obligations.
He emphasized that the firm measures taken by the government have garnered the backing of multilateral development institutions. Consequently, the World Bank is poised to facilitate $1.5 billion in concessional financing on Nigeria’s behalf. This funding will be both relatively affordable and swiftly disbursed.
Regarding the $80 million loan from the African Development Bank (AfDB), Edun disclosed that it will be allocated for the Ekiti Knowledge Zone (EKZ) project. This initiative aims to equip the youth in Ekiti with crucial technological skills, particularly given the increasing contribution of the technology sector to the nation’s economy.
However, increasing borrowing amid unsustainable public debt stock and dwindling revenue remains a huge concern for Nigerians, especially as the government is believed to be borrowing for consumption. Nigeria is said to be spending more than 90 percent of its revenue on debt servicing currently.