Nigeria’s US$1.5 billion World Bank loan delayed over reforms, sources say

The World Bank is unlikely to approve a much-needed US$1.5 billion for Nigeria in August as planned, due to concerns over desired reforms, three sources have said.

“They are not convinced about the reforms,” a source close to the government said.

All three sources declined to be named because of the sensitivity of the negotiations. The source added that the naira was the core issue.

World Bank loans are often contingent upon reforms. It has not outlined any demands but said previously that it was “recommending” a more unified, flexible exchange rate. Fuel subsidies and electricity tariffs are also being discussed.

Another banking source said the loan could now not be approved until October. Nigeria’s Finance Ministry has directed all queries to the World Bank.

In a statement, the World Bank said discussions were at an advanced stage but confirmed that it had not presented the loan to its board.

“Of particular importance are the steps the government is taking to marshal the needed fiscal resources for a pro-poor response to the crisis and undertake the reforms that will help ensure a robust recovery,” the Bank said.

A delay in financing from multilateral lenders could leave the country unable to finance fully a record $28.35 billion budget.

The Central Bank of Nigeria has forecast that the balance-of-payments gap this year will be $14 billion.

Demands transparency

Nigeria’s policy of supporting the naira has become costlier since the slide in the oil price, as the country relies on oil for 90% of its foreign exchange.

It has devalued the naira twice this year, but the sources said that it is not enough for the World Bank, which wants fuller reform of the naira policy.

Nigeria also says it has eliminated fuel subsidies through a “floating” price cap, but two of the sources said the World Bank felt the mechanism was not sufficiently transparent.

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