The Federal Government is seeking from the World Bank and the African Development Bank the sum of $3.5bn (N697bn) in emergency loans to fill a growing gap in its budget in the latest sign of the economic damage being wrought on oil-rich nations by tumbling crude prices.

The $2.5bn (N498bn) loan from the World Bank and a parallel $1bn (N199bn) loan from the AfDB, which will enjoy below-market rates, must still be approved by both banks’ boards, the Financial Times reported on Sunday.

Under World Bank rules, its loan will be subject to an IMF endorsement of the government’s economic policies and bank officials said they would have to be confident that the Nigerian government was undertaking significant structural reforms.


 
Both loans will carry far fewer conditions than one from the IMF, which does not believe that Nigeria needs a fully-fledged international bailout at this point.

The loan request from the eight-month-old government of President Muhammadu Buhari is intended to help fund a N2.9tn ($15bn) state deficit, which has been deepened by a hefty increase in public spending as the country attempts to stimulate a slowing economy.

It came as concerns grow over the impact of low oil prices on petroleum exporting economies in the developing world.

Nigeria’s economy has been hit hard by the fall in crude prices — oil revenues are expected to fall from 70 per cent of income to just a third this year.

The Minister of Finance, Mrs. Kemi Adeosun, had recently said Nigeria was planning its first return to the bond markets since 2013.

But Nigeria’s likely borrowing costs have been rising alongside its budget deficit. A projected deficit of N2.1tn ($11bn), or 2.2 per cent of gross domestic product, had already risen to N2.9tn ($15bn), or three per cent, as a result of the recent turmoil in oil markets.

Officials from the IMF and the World Bank are heading to Azerbaijan to discuss a possible $4bn emergency loan package

“I think we all agree that Nigeria is facing significant external and fiscal accounts challenges from the sharp fall in oil prices, as of course are all oil exporters,” the IMF’s representative in Nigeria, Gene Leon, told the FT.

But he added that Nigeria was not in immediate need of an IMF programme. “We are not in that space at all,” he added.

An IMF mission that visited the country in January as part of a regular review estimated that Nigeria’s economy grew at 2.8 to 2.9 per cent in 2015 and predicted it would register 3.25 per cent growth this year, down from an average 6.8 per cent in the decade to 2014, Leon said.

The country’s financial buffers are also eroding. The Central Bank of Nigeria’s foreign exchange reserves have nearly halved to $28.2bn from a peak of almost $50bn just a few years ago. A rainy-day fund that had $22bn in it at the time of the 2008-09 global financial crisis now has a balance of $2.3bn.