The African Development Bank has approved $600m loan as the first tranche of a $1bn budget support to help finance Nigeria’s economic governance, diversification and competitiveness programme.
The Spokesperson for the bank in Nigeria, Fatima Abubakar, said in a statement that executive directors of the bank approved the facility on Wednesday.
The last tranche of $400m will be approved in 2017, Abubakar said.
The operation is part of a two-year (2016-2017) fiscal programme of support to enable Nigeria to implement reforms to achieve efficiency in government business, combat corruption and promote diversification.
It will help the government to create fiscal space to facilitate smooth implementation of its budget, support fiscal and structural reforms and improve social sector spending to protect the most vulnerable segments of the population.
The facility will also assist the country’s efforts to quickly build a buffer of foreign exchange reserves, which will contribute to easing pressure on the foreign exchange market and stabilising the naira.
Nigeria’s success in efforts to achieve macroeconomic stability and economic recovery will signal the end of the current recession.
An elongation of the recession has potential to severely affect the economies of neighbouring countries in West and Central Africa, she added.
Abubakar quoted AfDB President Akinwumi Adesina as saying: “We must think through innovative solutions to support our regional member countries in crisis situations like this.
“We must also provide them with the knowledge products they require to get back on track.”
She added that given Nigeria’s demonstrated commitment to significantly scale up infrastructure investments (30 per cent of the 2016 Budget), the resources would contribute to creating the fiscal space for investments in power, housing and transport.
These are key sectors for stimulating the strong economic growth required to exit the recession, Abubakar said.
Nigeria’s economy has been hard hit by a sharp decline in oil prices, which provides the bulk of government revenues and exports although agriculture and services contribute most to GDP.
Over 90 per cent of Nigeria’s exports and at least 70 per cent of government revenues come from the oil sector, which is projected to have shrunk by 1.6 per cent within the year.
The economy slipped into a recession in the second half of the year because of foreign currency shortages, sharp reduction in power generation, vandalism of oil installations, lower oil production and weak investor confidence.
At the end of December 2015, AfDB’s portfolio comprised 46 operations estimated at 3.01 billion dollars.
The portfolio consists of 22 public sector operations valued at 1.51 billion dollars or 31 per cent of the entire portfolio and 24 private sector projects, estimated at 2.21 billion dollars or 69 per cent.
Adesina had, at recent meeting with President Munhammadu Buhari and economic stakeholders, pledged to provide Nigeria with one billion dollars loan to help it reinvigorate the economy.