Musings From Abroad

World Bank grants Nigeria’s request for a $2.25 billion loan

Published

6 months ago

June 14, 2024

According to a statement released by the World Bank on Thursday, Nigeria has been granted a $2.25 billion loan to help stabilize its economy after implementing reforms and increasing aid to the underprivileged.

Nigeria wants to borrow up to $2.25 billion from the World Bank, according to Finance Minister Wale Edun’s April announcement. The proposal is expected to be approved by the bank’s board in June.

The boldest reforms the nation has seen in decades were started by Nigerian President Bola Tinubu in May of last year. He eliminated a popular but expensive fuel subsidy and twice devalued the currency substantially in an attempt to spur economic growth. However, the actions exacerbated a situation caused by rising costs of living and increased inflation.

The International Monetary Fund predicted that gasoline subsidies could account for as much as 3% of GDP this year due to the devaluation since rises in pump prices have not kept pace with their dollar cost.

Additionally, labour unions have been putting pressure on Tinubu to undo changes. According to the World Bank, it has authorized two loans totalling $750 million to speed up tax mobilization and $1.5 billion to support Nigeria’s reforms.

Nigeria has taken “initial critical steps to restore macroeconomic stability, boost revenues, and create the conditions to reignite growth and poverty reduction have been taken.” Nigeria has also started important reforms to address economic distortions and strengthen its fiscal outlook.

According to the World Bank, the loan will aid Nigeria in its efforts to increase non-oil revenue and foster fiscal sustainability, both of which will enable the West African country to provide high-quality public services.

Related Topics:Featured Nigeria World Bank

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Musings From Abroad

World Bank doubts Ethiopia-IMF debt assessment

Published

2 days ago

December 24, 2024

Ifeoluwa Dada

Some officials of the World Bank have questioned if the study supporting Ethiopia’s debt restructuring may be “faulty” after criticising an evaluation of the country’s finances done with the International Monetary Fund (IMF).

World Bank consultant, Brian Pinto, and its head economist, Indermit Gill, evaluated the July Debt Sustainability Analysis (DSA), which was created by the IMF and employees of the International Development Association (IDA), the World Bank’s fund for the world’s poorest countries, in an internal document seen by Reuters.

According to the authors, Ethiopia is experiencing a short-term cash shortage rather than a long-term solvency problem, which is a source of conflict between the government and holders of its $1 billion international bond that is in default, based on the DSA.

“We found that the bondholders have interpreted the DSA correctly, but the DSA itself may be faulty,” Pinto and Gill wrote in the paper from earlier this month. “The disagreements about Ethiopia’s debt sustainability will be repeated as other countries become debt distressed.”

A World Bank representative responded to a question regarding the paper by saying, “We generally don’t comment on internal deliberations between the World Bank and the IMF or any of our partner institutions.”

As part of the most recent review of the Fund’s loan program, Ethiopian State Finance Minister Eyob Tekalign told Reuters that the DSA had just been reviewed by IMF and World Bank teams and that the status had not changed significantly.

Without providing further details, an IMF representative acknowledged that its officials travelled to Ethiopia in November for the second review of the Fund’s loan program and added that every review incorporates an update to the DSA. Regarding the memo, the spokeswoman remained silent.

A request for comment from Pinto and Gill was not answered. There has been a tense confrontation between Ethiopian officials and bondholders.

The main point of contention is whether, as bondholders contend, Ethiopia is experiencing a liquidity shortage that may be resolved by rescheduling debt or if it is experiencing longer-term financial issues that necessitate haircuts, or debt write-downs.

According to the DSA, certain statistics on exports indicated pressures on both liquidity and solvency.

It was reported in October that the DSA indicated a solvency problem and that writedowns were inevitable. Investors have criticised a government proposal that suggests an 18% haircut in addition to rejecting the evaluation.

Musings From Abroad

Swiss company Mercuria partners Zambia’s IDC in new metals trading firm

Published

5 days ago

December 21, 2024

Ifeoluwa Dada

According to a statement released by Swiss commodities trader, Mercuria, on Thursday, it has established a metals trading arm with Zambia, the second-largest producer of copper in Africa.

The trading unit is jointly owned by Mercuria and an arm of Zambia’s Industrial Development Company (IDC), and its purpose is to allow Zambia to engage directly in the minerals trading market.

The joint venture “envisages the establishment of a vehicle to market and trade Zambian copper by mutual leverage,” according to a statement from Cornwell Muleya, the CEO of IDC.

The southern African nation wants to increase copper output to roughly 3 million metric tonnes within the next ten years, and in 2023, it produced roughly 698,000 tonnes of copper, down from 763,000 metric tonnes the year before.

In June, the Zambian government announced that it would establish a minerals trading unit.

Investors including First Quantum Minerals and Barrick Gold are ramping up production, with output set to receive a further boost once Vedanta Resources’ Konkola Copper Mines restart activity.

“Our joint venture with IDC marks a significant milestone for Zambia as it positions itself more strategically in the global minerals market,” Kostas Bintas, Mercuria’s global head of metals and minerals, said in the statement.