The Federal Government of Nigeria is currently engaged in discussions with the World Bank regarding a potential loan of $1.5 billion. The purpose of this loan would be to provide support for the budget and inject liquidity into the foreign exchange market. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, made this announcement during an interview with Bloomberg TV at the World Economic Forum in Davos, Switzerland.
Edun explained that the reforms implemented by the government, such as the removal of fuel subsidies and the merger of the foreign exchange market, require assistance from multilateral organizations. He expressed optimism about securing the loan, stating, "We're hoping to get $1 billion or $1.5 billion from the World Bank. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms. What we've done with fuel subsidies, what we have done in terms of the foreign-exchange market reform, deserve support. We've done enough and we deserve to be rewarded imminently."
In addition to seeking external support, the government is also considering tapping into domestic dollar savings to strengthen the Nigerian currency, the naira. Edun emphasized that stabilizing the naira is a top priority and mentioned that oil revenue remains the primary source of liquidity. Furthermore, the government aims to utilize both domestic dollar savings within and outside the official market to bolster the currency. Edun noted that there is a significant amount of cash circulating in the Nigerian economy.
Addressing the issue of the foreign exchange backlog, the Minister highlighted that the Central Bank of Nigeria (CBN) is focused on clearing it, which is estimated to be around $5 billion. He suggested that there is liquidity within the banking system and proposed involving banks in resolving the backlog, either through spot or forward-rate transactions. The government believes that by harnessing the available dollars, the backlog can be significantly reduced in a short period.
Looking ahead, Edun mentioned the possibility of Nigeria issuing Eurobonds later in the year if the interest rates are favorable. He noted that major issuers have indicated the potential for such issuance in 2022.
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