The African Development Bank has called off a loan to Nigeria that would have helped fund the country’s budget, the Vice-President for Power, Energy, Climate Change and Green Growth, AfDB, Amadou Hott, has said.
Hott spoke on Monday in an interview with Reuters during a Nordic-African business conference in Oslo, Norway.
He said the bank would likely be redirecting the money to specific projects in Nigeria rather than give to the country to fund its budget.
The AfDB had been in talks with Nigeria for around a year to release the second tranche of $400m of a $1bn loan to shore up its budget for 2017, as the government tried to reinvigorate the stagnant economy with heavy spending.
But Nigeria refused to meet the terms of international lenders, including the World Bank, to enact various reforms such as allowing the naira to float freely on the foreign exchange market.
Rather than loan Nigeria money to fund its budget, the AfDB is likely to take at least some of that money and “put it directly into projects,” Hott explained.
Because prices for oil, on which the Federal Government relies for about two-thirds of its revenues, have risen and the naira-dollar exchange rate has improved, the country is relying less than expected on external borrowing, Hott said.
No one from the Ministry of Finance was immediately available to comment.
Call made to the Special Adviser on Media to the Minister of Finance, Mr. Oluyinka Akintunde, did not go through as of the time of filing the report.
Nigeria’s N7.44tn 2017 budget is just one in a series of record budgets that the government has faced obstacles funding, pushing it to seek loans from overseas.
In late 2016, the AfDB agreed to lend Nigeria a first tranche of $600m out of $1bn. But negotiations over economic reform later bogged down, blocking attempts to secure the second tranche of $400m million, sources told Reuters then.
Now, AfDB’s loans will be more targeted, Hott said.
“It’s hundreds of millions of dollars, just in one go, that we were supposed to provide in budget support, but we will move into real projects,” he added.
Earlier this month, the head of Nigeria’s Debt Management Office said the country was still in talks with the World Bank for a $1.6bn loan, which will help plug part of an expected $7.5bn deficit for 2017.
The administration is also trying to restructure its debt to move away from high interest, naira-denominated loans and towards dollar loans, which carry lower rates.