David Malingha Doya
International financial institutions ready to support nation
Economy to expand up to 2.5% this year after 2016 contraction
Nigeria will easily achieve its target of $3.5 billion foreign borrowing in 2017 as improved oil output helps the economy to recover from last year’s contraction, the first since 1991, Moody’s Investors Service said.
“The international financial institutions are ready to support Nigeria,” Aurelien Mali, a vice president and senior analytical adviser for Africa at the ratings company, said by phone on Wednesday. “As long as its project-based lending, the funding will be available from lenders such as the African Development Bank, and the budget support from the World Bank will come on top of that.”
Nigeria has proposed a record 7.3 trillion-naira ($23.1 billion) budget for this year to boost infrastructure investment and help its economy recover from a contraction of 1.5 percent in 2016, the first such slump in 25 years. The economy of Africa’s most-populous nation was weighed down by a drop in the price and output of oil, its biggest export, which led to a shortage of dollars.
The government has been negotiating $1.25 billion in budget support from the World Bank and expects to get the remaining $400 million of a $1 billion credit facility from the African Development Bank, Mali said. It can raise the rest from bilateral and multilateral partners and also from lenders through commercial loans and or even a sukuk bond, he said.
Moody’s rates Nigeria’s debt at B1, four levels below investment grade. Last month, S&P Global Ratings kept its assessment of the nation’s credit at one step lower than Moody’s.
The nation will probably raise debt through more Eurobond sales this year, the International Monetary Fund said Wednesday. This is in addition $500 million placed last month as part of the 2016 budget and $1 billion raised in February.
Nigeria expects at least $1 billion in loans from the World Bank this year, according to Ben Akabueze, the director-general of nation’s budget office. The World Bank is in talks with the government and other development partners on the most appropriate financing instrument to support the country’s economic plan, the lender said in an emailed response to questions.
The government targets growth of 7 percent by 2020, according the blueprint released last month. The economy should expand by 2 percent to 2.5 percent this year as the price and output of oil improves, Moody’s Mali said. This would depend on dollar liquidity, capital spending and the payment of arrears, he said.
Moody’s growth forecast compares with the International Monetary Fund’s prediction at 0.8 percent for this year.