ABUJA – The African Development Bank (AfDB) is set to lend Nigeria a total $4.1 billion over 2016 and 2017, and $10 billion by 2019, its president said on Monday, to help Africa’s biggest economy plug its budget gap and develop its infrastructure.
Akinwumi Adesina said he would go to the pan-African lender’s board next month to seek approval for a first, $1 billion loan to cover this year’s deficit as Nigeria grapples with its first recession in more than 20 years.
“The bank is going to provide in total between 2016/2017 $4.1 billion to Nigeria in various areas,” said Adesina.
“I expect that our portfolio in Nigeria will not decrease — it will actually grow. We expect to invest in Nigeria, by 2019, a total of $10 billion.”
Adesina said funds that the AfDB aims to lend over the next two years would be used to develop the power and agriculture sectors in the west African country, aiding a move away from the country’s reliance on oil revenue.
Finance Minister Kemi Adeosun had earlier said the budget support facility would be concessional and carry an interest rate of 1.2 percent.
The OPEC member’s economy has been shrinking largely as a result of the plunge since mid-2014 in oil prices, which generate 70 percent of government revenues. Additionally, attacks on energy facilities in the Niger Delta have cut crude production by around a third since the start of the year.
That has left Nigeria struggling to fund a record 6.06 trillion naira ($18.6 billion) 2016 budget that aims to stimulate growth by tripling capital expenditure.
Aside from a wealthy elite who have profited from oil wealth, most of the 180 million people in Africa’s most populous nation live on less than $2 a day. Development has been held back for decades by poor power, road and rail networks.
Adesina, a former Nigerian agriculture minister, said the AfDB had invested $500 million dollars in the Development Bank of Nigeria, which is being set up by Nigerian authorities.
He said the government was appointing a team to run the bank which they expect to be in place as early as November.
The Ivory Coast-based AfDB was founded in 1964 and is funded by African nations and shareholder countries outside the continent.
Adesina said “diversification in critical sectors” such as agriculture and manufacturing were needed, and that incentives such as tax cuts needed to be provided to encourage infrastructure development by the private sector.
Earlier, finance minister Adeosun said the country was not borrowing too much. “What we are trying to do is to ensure that this money we are borrowing, we use it on the key infrastructure that will drive the economy,” she said.
Last week the central bank left its benchmark rate at 14 percent, defying calls from Adeosun to lower rates so that the government could borrow domestically to boost the economy without increasing debt-servicing costs. [nL8N1BW3YE]
Adesina said the AfDB had “asked for the need for better synergies between the macro policy side and monetary policy side and also the fiscal policy side of the economy”.