The African Development Bank has announced that it will seek to bail out Nigeria with a $4.1 billion loan (3.6 billion euros) over the next two years and $10 billion by 2019.
Akinwumi Adesina, the President of the African Development Bank (AfDB) who is on a three day visit to Nigeria, said he would go to the pan-African lender's board next month to seek approval for an initial $1 billion loan for Nigeria as the country grapples with its first recession in more than 20 years.
The money will help Nigeria revamp its power and agricultural sectors and also develop its infrastructure. It is his first official visit to the country since his appointment as president of AfDB last year.
The loan also comes at a time when Nigeria, Africa’s biggest economy, has been going through a recession due to the fall in oil prices. In addition, its currency is falling, inflation is above 17 percent and the country is suffering from a lack of foreign currency.
Adesina, a former Nigerian agriculture minister, said that the loans will move the country away from a reliance on oil revenue and focus on other productive sectors like agriculture and agro-industrial sectors and to small and medium enterprises (SMEs), an important job creator.
"What is needed is not only to spend your way out of the recession but to also incentivize your way out of the recession," Adesina told a news conference following his meetings with President Muhammadu Buhari and his Economic Management Team.
Nigeria’s Finance Minister Kemi Adeosun said that the loan has been a great economic relief to the country and that most of the sectors that the bank is focusing on are the very sectors that Nigeria would like to focus on to grow its economy.
"What we have to do is to make sure that the money we borrow is used on the key infrastructure that will drive the economy," Adeosun said.
Shrinking oil production
Attacks on energy facilities in the Niger Delta have cut crude production by around a third since the start of the year. That has left Nigeria struggling to fund a record 6.06 trillion naira ($18.6 billion, 16.6 billion euros) 2016 budget that aims to stimulate growth by tripling capital expenditure.
James Shikwati, an economist and head of the Inter Region Economic Network, told DW that with inadequate infrastructure in place, capital expenditure would not yield desirable results.
"Nigeria, having good infrastructure, would be able to take its goods to neighboring countries at the same time export to European markets. Infrastructure has been one of the key challenges that have been holding back agricultural products from getting to the markets," he told DW.
Shikwati also said that Nigeria has been over-reliant on the export of raw material which made it unattractive for many potential financiers.
"Adesina, as a former agriculture minister, knows the challenge of having a one-sided approach to a rich economy. As the AfDB head, he might be carrying a message of diversification of the Nigerian economy if it has to sustain its vibrancy as a leading economy in Sub-Saharan Africa." The AfDB has also invested $500 million dollars in the Development Bank of Nigeria which is being set up by Nigerian authorities.