Nigeria seeks approval for US$500m WB credit

ABUJA – Nigerian President Umaru Yar’Adua is seeking Senate approval for a US$500 million concessional credit facility from the World Bank to help fund the 2009 budget, according to a letter to the upper house of parliament.

‘We are seeking concurrence of the National Assembly to substitute the proposed naira-denominated Eurobond, which has been provisioned for in the 2009 budget, with a World Bank Concessional Credit Facility in an equivalent amount of US$500 million,’ the letter, seen by Reuters on Wednesday, said.’The amount will assist in preserving critical core infrastructure including power, works, transport and aviation,’ the letter said.Sub-Saharan Africa’s second-biggest economy put plans to raise funds on the global capital markets with a benchmark international bond on hold earlier this year due to the weak global economic environment.Yar’Adua said the concessional terms for the World Bank facility included a 10-year grace period and 40-year repayment period, a zero interest rate, 0,75 per cent service charge and 0,5 per cent commitment charge on undisbursed balance.Finance Minister Mansur Muhtar said in May that Nigeria was talking to the World Bank and other development agencies about obtaining loans to help plug budget shortfalls.Lower global oil prices have cut into foreign earnings in Africa’s biggest energy producer and analysts forecast that its budget deficit could reach five to six per cent of gross domestic product this year absent a sustained upturn in the oil market.The global environment means the options for plugging budget shortfalls in Africa’s most populous nation are limited.Nigeria had announced plans last September to issue a US$500 million 10-year naira-denominated bond, its first international offer, but said in March the plans were on hold. ‘With the global credit crunch, there is a risk that the proposed bond issue will be under-subscribed and overpriced, especially since Nigeria is a first-time issuer,’ Yar’Adua said in the letter.Weak oversight and lax enforcement mean it is also failing to raise as much tax revenue as it could. Yar’Adua said the government would use gains accrued from the difference between the exchange rate assumed in the 2009 budget of 125 naira to the dollar and the actual rate, currently around 148, to further bridge the financing gap.He said the amount accrued was 98,9 billion naira (US$670 million) by the end of June.He also said he was seeking Senate approval to use the federal government’s share of the country’s excess crude account – where oil revenues above a benchmark price are saved – amounting to 54 billion naira to plug budget shortfalls.- Nampa-Reuters