Nigeria to big to fail – African Development Bank President

Nigeria experiencing recession to receive support from AfDB

The African Development Bank (AfDB) will continue to support Nigeria as the economy is too big to fail and important for the region, AfDB President Akinwumi Adesina said last week.

“When you had the banking crisis, people said the banks were too big to fail,” Adesina said in an interview. “In the case of Africa, Nigeria is too big to fail. So we are going to be strongly supporting Nigeria.”

Gross domestic product (GDP) in the West African country contracted in the first half of the year, and is forecast by the International Monetary Fund (IMF) to shrink by 1.8 percent in 2016. The oil-dependent economy, which accounts for about a third of sub-Saharan Africa’s GDP, according to IMF data, is reeling from a 50 percent drop in prices of crude since mid-2014, coupled with power and foreign-currency shortages, and the delayed implementation of spending plans squeezed government revenue.

The AfDB is set to approve a US$1 billion loan for budget support for Nigeria next month, according to Adesina – who was Nigeria’s agriculture minister until last year.
The AfDB will increase its loans in Nigeria to US$4.1 billion in 2 years, and US$10 billion by 2019 as it makes more funds available to help increase the generation and transmission of electricity, and boost farming output, he said.

The AfDB will also finance the planned Development Bank of Nigeria with US$500 million, of which US$50 million will be equity, Adesina said. The lender will invest US$200 million in the Nigeria Export-Import Bank, US$100 million in the country’s Bank of Industry, and create a US$500 million energy fund, he said.

The energy fund will finance mainly off-grid projects and renewable-energy entrepreneurs working to generate 9 megawatts to 15 megawatts of power each, Adesina said. The bank will invest US$363 million this year in projects to produce about 1,400 megawatts, and put an unspecified amount in projects next year to generate an additional 1,385 megawatts, he said.

The federal government has said it will source half of the 1.8 trillion naira (US$5.8 billion) of debt planned for this year from international capital markets and multilateral and bilateral lenders. Nigeria plans to raise US$1 billion through a Eurobond by the end of this year.

The AfDB will also support Nigeria’s efforts to rebuild its northeastern region with funding of US$250 million to set up infrastructure and improve water and health services, as it recovers from the effects of the al-Qaeda-linked Boko Haram disturbances.

Source: Bloomberg