FG Implementing World Bank’s Loan Condition With Subsidy Removal, Electricity Tariff Hike-Expert

Nigeria has a high chance of securing the delayed $1.5bn loan approval by the World Bank Group as it has stepped- up efforts to address the concerns raised by the lender, the Chief Executive Officer of Cowry Asset Management, Johnson Chukwu, said.

The policy analyst said this in an interview on Arise TV monitored by THE WHISTLER.

 
Nigeria expects to secure a $1.5bn loan from the  multilateral lender in October this year.

The amount was due for approval by the World Bank last August but was delayed over reform concerns.

The Policy Analyst said the confidence that the loan would be approved next month follows the Nigerian government’s effort to address those issues that the World Bank had raised.

The World Bank had expressed concerns over petroleum subsidy, which cost the country N752bn in 2019 alone, according to figures released by the Nigerian National Petroleum Corporation.

Chukwu said, “We can’t say we have a fully deregulated segment of the oil and gas sector. But we have seen a significant improvement and I hope what the government will do is to eventually take out some of the subsidy, that have been paid along the value chain such as the Petroleum Equalisation Fund and the amount being paid to the PPPRA.”

He said subsidy removal would allow Nigeria to have a “free market reign,” as government agencies will only play a regulatory role.

The expert pointed to the upward review of the country’s electricity tariff and the unification of the country’s exchange rate along the official rate as another clear indicator that Nigeria is on track to securing the $1.5bn facility from the World Bank.

“I think three of the critical issues have been addressed but for the  harmonisation of the exchange rate,” Chukwu said.

The Central Bank of Nigeria recently adjusted the country’s exchange rate to N379 per dollar at the official window.

The CEO said the government needs to eliminate the multiple windows of the foreign exchange market.

“That would address all the issues that were raised by the World Bank, which is what gives me the confidence that come October, the government may be in the position to have our loan application presented to the Board of the World Bank,” he said.

The expert believes that Nigeria’s weak fiscal framework has been a major set- back in secured funding from multilateral lenders.

Chukwu said Nigeria cannot run a big government where the FG plays the role of the private sector.

“When you have a market oriented economic policy environment, you have more efficient resource allocation which is what the World Bank and the IMF have been pushing for,” the CEO added.

He said the $1.5bn from the World Bank is needed to achieve the level of macro-economic stability needed in the face of low crude oil prices.