In response to the severe dollar shortage contributing to the decline of the Naira, Nigeria is actively seeking financial support from the World Bank. Finance Minister Wale Edun announced on Wednesday that the country is aiming to secure $1 billion to $1.5 billion for budgetary support. The funds are intended to alleviate the economic challenges faced by Africa’s largest economy.
Edun highlighted the possibility of issuing a Eurobond in late 2024, emphasizing that Nigeria’s ongoing economic reforms make the country deserving of international support. Eurobonds, denominated in foreign currencies, provide a mechanism for Nigeria to navigate its financial landscape amid challenging economic conditions.
The Finance Minister stated, “It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.”
Nigeria has previously issued Eurobonds to raise debt for infrastructure development and economic boost. In 2022, the country entered the international debt markets with a $1.25 billion Eurobond issuance. Subsequently, in the following year, a $500 million Eurobond issued in July 2013 was redeemed.
During a press conference in October 2023, Minister Edun mentioned that the $1.5 billion World Bank loan would come with zero interest, emphasizing the concessional nature of the funding.
Nigeria, grappling with a debt of about N87 trillion, is seeking financial support to address a budget deficit in the 2024 fiscal year, which stands at N28.7 trillion. The deficit, amounting to N9.18 trillion, is equivalent to 3.88 percent of the nation’s Gross Domestic Product (GDP).
In the face of mounting economic challenges, the country is also dealing with a record low value of the Naira. On Wednesday, the Naira fell to N1,320 per dollar on the parallel market, a record low. The shortage of dollars has widened the gap between the official exchange rate and the parallel market rate, impacting the street value of the Naira.
To address the deficit, President Bola Tinubu outlined a financing approach that includes new borrowings, proceeds from privatization, and a drawdown on multilateral and bilateral loans earmarked for specific development projects.
As Nigeria faces increased demand for dollars, persistent shortages, and speculative activities, the financial assistance from the World Bank is expected to provide crucial support to stabilize the economy and strengthen the Naira.