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World Bank warns Nigerian govt over continued borrowing from its central bank

Published

1 year ago

July 28, 2023

Multilateral body, World Bank Group has warned the Nigerian government about continued borrowing from the country’s Central Bank.

The World Bank’s Lead Economist for Nigeria, Alex Sienaert warned that managing the borrowing would reduce the inflationary pressure on the economy. He made the position on Thursday during an economic review session at the Lagos Business School.

Sienaert praised the administration for its recent economic changes but pointed out that these reforms needed to be maintained for the economy to recover from the shocks of the moment and experience significant growth in the near term.

He said, “The whole agenda of tackling inflation is obviously a huge one. Some ideas include reducing subsidized CBN lending to medium and large firms and the government borrowing from CBN.

“All of these things increase the money supply and reducing that will be helpful to reduce inflation, and then replacing imports with FX restrictions with tariffs.”

The World Bank had last month hinted that Nigeria could save up to 3.9 trillion naira ($5.10 billion) this year alone following recent reforms championed by the new administration of President Bola Tinubu.

He added that other strategies would need to be developed to raise more money so that spending could be raised to address the country’s true goals and stressed that the government’s intention to distribute cash palliatives after the elimination of fuel subsidies would enhance the available earnings and income of roughly 50% of Nigerians by 10%.

In the last seven years, advances from the Central Bank of Nigeria to the federal government under former president Muhammadu Buhari increased by 2900% to N23.8 trillion, an extraordinary increase that broke the law, fuelled inflation, and increased the nation’s debt load.

According to the CBN Act, the apex bank may provide short-term loans to the federal government in the event of a temporary income shortfall at a rate that the bank deems appropriate. However, the Act warns that the total amount of such outstanding advances “must not at any time exceed five percent (5%) of the Federal Government’s actual revenue for the preceding year.”

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IMF mission concludes 4th loan program assessment in Egypt

Published

34 minutes ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.