2018 budget in jeopardy as FG’s borrowing spree hits brickwall

By Odunewu Segun

Nigeria’s could have serious problems implementing the 2017 and very likely, 2018 budget following a the recent announcement by the African Development Bank (AfDB) that it wouldn’t follow up on a second tranche of the $1bn it had promised to give Nigeria.

Why this could be disturbing for the FG, National Daily gathered is that it could also be a signal of what is to come from its requests from other international lenders for funds to fill the record deficit budget that it is about to pass to the National Assembly for approval.

Recall that Nigeria is still negotiating with the World Bank for a $1.6bn loan, which will help plug part of an expected $7.5bn deficit for 2017. And the World Bank, just like the IMF has on several occasion called on Nigeria to allow the Naira to float. A suggestion Nigeria’s authority has always flatly refused.

Now, part of the reasons for refusing to continue with the loan agreement, according to the AfDB was Nigeria’s refusal to allow the Naira to float.

The AfDB’s loan cancellation could trigger similar refusals from other international lenders, hurting Nigeria’s chances of sourcing funds for its budget implementation.

With the country focusing more on external debts, which are cheaper than Naira debts, these refusals could hurt not only current negotiations but also future plans of the FG to source external debts.

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The decision of the AfDB’s loan cancellation of the remaining $400 million of the $1 billion could also signal more trouble for the FG’s 2018 plans in an indirect sense. Regarding why the bank had to cancel, Vice-President for Power, Energy, Climate Change and Green Growth, AfDB, Amadou Hott, said Nigeria refused to meet the terms of the bank, which include reforms such as allowing the free float of the Naira.

According to findings by National Daily, the cancellation could deal a significant blow to the country’s 2017 and very likely, 2018 budget implementation. Already, due to dropping oil prices and a stagnating economy, the FG is seriously finding implementation of the 2017 budget extremely hard considering the shortfall of revenue.

But the story is not all bad for Nigeria, as the AfDB has said that the refusal to release the $400 million does not mean a total withdrawal from Nigeria. Rather, according to Hott, AfDB’s loans will be more targeted.