The World Bank is reportedly toying with Nigeria over the proposed $1.5 billion dollars put forward since February 2020 but yet to be disbursed 6 months after.
Information from Fayer and Fraser an exclusive newsletter edited by Feyi Fawehinmi, a respected Financial analyst, indicates the loan from the World Bank has remained elusive as the multilateral institution has continued to move the “goalposts” through stringent conditions that are unprecedented.
According to Feyi, It is difficult to understand why the World Bank appears to be leading Nigeria on a merry dance over a relatively small loan amount that is less than half of what the IMF already approved and disbursed. One can consider a scenario where the funds were actually to help with Nigeria’s response to the pandemic and it had not yet been released by the end of August.
The World Bank approached Nigeria in February 2020 for a possible loan disbursement as the world envisioned the economic impact of COVID-19 on the global economy particularly emerging markets in sub-Saharan Africa like Nigeria. Yet after several presentations that lasted between March and April, the loan remains un-disbursed. The loan was meant to be disbursed in June 2020.
Several reports at the time indicated that the World Bank had laid out conditions upon which the Apex bank was to lend money to Nigeria among which are a unification of the exchange rate, removal of fuel subsidy, and introduction of a cost-reflective tariff. This is despite being a loan tied to the Covid-19 pandemic.
Rather than approve the loan, the World Bank then came up with a new demand – the CBN had to clear the backlog of foreign exchange demand which it calculated at US$6 billion. The CBN’s own calculations put the backlog at US$2 billion while in a separate calculation, the IMF put the figure at US$2.5 billion. To be clear, the backlog from foreign dividends, such as the one that recently embarrassed Nigeria’s largest bank, as well as those from correspondent banks is not included in CBN’s calculations. Still, it will be a stretch to imagine that even with those numbers included the number would reach the World Bank’s US$6 billion figure.” Faye and Fraser
What is the World Bank’s intention?
According to Faye and Fraser “One speculation is that the World Bank is unhappy that foreign portfolio investors are now stuck in the country unable to get the dollars they need to exit their positions and leave the country.”
As Nairametrics has often reported, Nigeria has a foreign exchange pent-up demand between $2-3 billion from both foreign and local portfolio investors. Nevertheless, Faye and Fraser wonders why this is a condition precedent to disbursement of the loan
“But this is also not the first time the World Bank will lead Nigeria on such a dance that ultimately ends in disappointment. In 2016 there were extensive talks about a loan which went on and on and ended with no funds being disbursed. Most disturbing is that the World Bank now seems to be using the media to selectively leak information to the public designed to paint a picture of the country’s resistance to reforms as the sole reason for the delay,” Fayer and Fraser stated.
A top-level government official who spoke to Nairametrics on condition of anonymity also wondered why the World Bank was placing so much emphasis on conditionalities that do not relate to the essence of the loan. “They have not asked for things like how many COVID-19 centers have we built? How well are we containing the spread of the virus and what palliatives has the government put in place to alleviate the poor? Have we properly deployed some of the funds and grants already raised by the government” the source asks?
Why this matters: The government, particularly the central bank has been chastised for months for taking too long to meet the conditions of the World Bank. However, with the prolonged delays to disbursement and spurious conditions, it appears there is more than meets the eye. Nigeria is significantly under pressure for a loan and has ruled out on any Eurobond this year. It could reconsider this move if the World Bank continues to delay.
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Article contribution: Abiola Odutola, Chike Olisah
Price Watch: Nigerians paid less for Kerosene in December 2020
NBS Report shows that consumers paid less for Kerosene in December than they did in November 2020.
The latest National Bureau for Statistics (NBS) Price Watch report for the month of December 2020 indicates that the average price per litre paid by consumers for National Household Kerosene reduced by 0.17% from N353.38 in November 2020 to N352.79 in December 2020.
Also according to the report, the average price per gallon paid by consumers for National Household Kerosene reduced by 3.52% from N1,218.50 in November 2020 to N1,175.59 in December 2020.
Price variations across states
- In the month of December 2020, States with the highest average price per litre of kerosene include; Benue (N436.81), Ebonyi (N425.83) and Taraba (N423.33).
- However, consumers in Bayelsa (N235.95), Rivers (N302.04) and Delta (N307.69) enjoyed the lowest average price per litre of kerosene.
- Consumers in Kebbi (N1,534.21), Nasarawa (N1,488.00) and Benue (N1,450.00) paid the highest average price per gallon of kerosene.
- While consumers in Sokoto (N733.33), Bayelsa (N773.75) and Adamawa (N822.00) on the other hand, paid the lowest average price per gallon of kerosene.
Prices across zones
- Consumers in South-East zone paid the highest average price for a litre of Kerosene (N377.53), followed by North East (N370.13), North West (N354.66), North Central (N354.44) while consumers in South West(N337.57) and South South (N325.96) paid the lowest average price for a litre of Kerosene.
- In respect of the average price paid for a gallon of Kerosene, consumers in North West zone paid the highest (N1,197.54), followed by North Central (N1,305.68), South East (N1,220.66), while consumers in South West (N1,161.00), North East (N1,113.25) and South-South(N1,037.60) paid the lowest average price of a gallon of kerosene.
Why this matters
Kerosene has remained an important source of energy for cooking for most families, both in the rural areas and cities. Kerosene is mostly used in rural areas as a source of lighting.
Considering that food and lighting are very essential to life, it is therefore important that the price paid for Kerosene is quite reasonable and as well as affordable for most Nigerians.
Nigeria’s inflation rate hits 15.75% in December 2020, highest in 3 years
This is 0.86% points higher than the rate of 14.89% recorded in November 2020.
Nigeria’s inflation rate increased by 15.75% (year-on-year) in December 2020, the highest rate recorded in 3 years.
According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the latest figure is 0.86% points higher than the rate of 14.89% recorded in November 2020.
On a month-on-month basis, the index increased by 1.61% in December 2020. This is 0.01% point higher than the rate recorded in November 2020 (1.60%).
The closely watched index rose sharply by 19.56% in December compared to 18.3% recorded in the previous month.
- On a month-on-month basis, the food sub-index increased by 2.05% in December 2020, up by 0.01% point from 2.04% recorded in November 2020.
- The rise in the food index was caused by increases recorded in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats.
The “All items less farm produce’‘ or Core inflation, which excludes the prices of volatile agricultural produce stood at 11.37% in December 2020, up by 0.32% when compared with 11.05% recorded in November 2020.
- Also, on a month-on-month basis, the core sub-index increased by 1.10% in December 2020. This was up by 0.39% when compared with 0.71% recorded in November 2020.
- The highest increases were recorded in prices of passenger transport by air, medical services, hospital services, shoes and other footwear, passenger transport by road, miscellaneous services relating to dwellings, hairdressing salons and personal grooming establishments, and repair of furniture.
- Others include vehicle spare parts, pharmaceutical products, motor cars, maintenance and repair of personal transport equipment, paramedical services, motorcycle, dental services, and bicycles.
Worst hit states
- In the month of December 2020, Bauchi State recorded the highest inflation rate at 19.85%, closely followed by Kogi State with an inflation rate of 18.4%
- Others include Edo (18.1%), Zamfara (17.9%), and Sokoto (17.6%)
- In terms of food inflation, Edo State also recorded the highest rise in inflation rate with 24.1%, followed by Kogi (23.16%), Sokoto (22.2%); while Kwara and Zamfara State recorded food inflation of 22.1% and 21.7% respectively.
Meanwhile, the urban inflation rate increased by 16.33% (year-on-year) in December 2020 from 15.47% recorded in November 2020, while the rural inflation rate increased by 15.20% compared to 14.33% recorded in November 2020.
What this means
The rise in the consumer price index indicates that consumers spent more in the month of December compared to the previous month.
- This implies that the purchasing power of Nigerians is continually eroding.
- Nigerians could be faced with new worries if the second wave of the covid-19 pandemic leads to a second round of lockdown in the country.
- The significant increase could, however, be attributed to the Christmas and New year festivities in the month of December.
Nigeria’s total public debt rises to N32.2 trillion ($84.57 billion) as at September 2020.
The total public debt (External and Domestic) incurred by Nigeria stood at N32.22 trillion ($84.57 billion) as of September 2020.
Nigeria’s total public debt stock as of September 2020, increased by over N6 trillion in just one year. This is according to the Nigerian Domestic and Foreign Debt report, recently released by the National Bureau of Statistics (NBS).
The total public debt (External and Domestic) incurred by Nigeria stood at N32.22 trillion ($84.57 billion) as of September 2020, which represents an additional N6.01 trillion when compared to N26.21 trillion recorded as of the corresponding period of 2019.
The breakdown shows that external debts accounted for 37.82% (N12.19 trillion) of the total debt stock, while domestic debts at N20.04 trillion represented 62.18% of the total.
- Further disaggregation of Nigeria’s foreign debt showed that $16.74bn of the debt was multilateral.
- Also, $502.38m was bilateral (AFD) and another $3.26bn bilateral from the Exim Bank of China, JICA, India, and
KFW while $11.17bn was commercial which are Eurobonds and Diaspora Bonds.
- Total external debt grew by $5.04 billion (N3.9 trillion) within the period, indicating an increase of 18.72%.
- Total domestic debt on the other hand declined by $5.86 billion. However, it represents an increase in Naira value of N2.09 trillion, largely due to multiple devaluations of the currency during the period.
A cursory look at the breakdown of the domestic debts show that 73.53% (N11.65 trillion) were in form of Federal Government bonds, 17.17% (N2.72 trillion) in Treasury bills, followed by Promissory Notes accounting for 6.13% (N971.9 billion) of the total federal government domestic debts.
Others include; FGN Sukuk (N362.6 billion), Treasury Bonds (N100.9 billion), Green bond (N25.7 billion), and Savings bond (N12.6 billion).
More loans to be expected
On the 31st of December 2020, President Buhari signed the 2021 appropriation bill of N13.59 trillion into law, which 25.7% higher than the revised 2020 budget of N10.8 trillion. However, the budget comes with a deficit of N5.6 trillion, which is expected to be financed mainly through borrowings both externally and domestically.
According to the minister of Finance, Budget, and National Planning, Dr. Zainab Ahmed, in a budget presentation on Tuesday, N2.34 trillion will be sourced each from domestic and foreign sources respectively, N709.69 billion from Multilateral/bilateral loan drawdowns, and N205.15 billion from privatisation proceeds.
Recall that Nairametrics reported in December that, the World Bank finally approved a $1.5 billion loan request made by Nigeria as budget support in order to cushion the impact of the covid-19 pandemic on the country’s revenue.
It is also worth noting that the federal government will be tapping into funds in unclaimed funds and dormant accounts.