The Federal Government is still in talks to obtain foreign loans to help fund a record $31 billion budget for this year, aimed at helping cope with a slump in oil prices, Budget minister, Udoma Udo Udoma said on Thursday.
President Muhammadu Buhari signed the 6.06 trillion naira ($30.6 billion) budget last week, but the government has not yet made clear how it plans to fund a deficit of 2.2 trillion naira.
“We hope to access loans on concessionary rates, we are working hard to secure external funding,” Udoma said in a speech, without elaborating.
He reiterated previous estimates for external and domestic borrowing needs totalling 1.8 trillion naira.
Nigeria has applied for a $1 billion loan from both the World Bank and African Development Bank while also considering selling Chinese Panda or Euro bonds, though no details have been made public.
Growth last year fell to its slowest rate since 1999 at 2.8 percent and inflation rose to a near four-year high of 12.8 percent in March while capital imports were down 74 percent year-on-year in the first quarter.
Buhari hopes to diversify the economy to end reliance on oil and gas revenues, which make up 70 percent of national income.
Late on Wednesday, with Buhari attending a conference in London, the government announced it was scrapping a costly fuel subsidy scheme and raising the price of gasoline, which many Nigerians rely on for electricity generation as well as transport, by 67 percent.
Despite the subsidy paid to fuel importers, which foreign donors say is subject to widespread corruption, Nigeria has been suffering acute fuel shortages for months.
However, a bid by Buhari’s predecessor Goodluck Jonathan to scrap the subsidy in 2012 was defeated by nationwide strikes, and the umbrella Labour Union Congress promised to resist the latest attempt.
Vice President Yemi Osinbajo also urged the central bank on Wednesday to rethink its foreign currency policy to stimulate investment. “We believe there must be some substantial revaluation for the foreign exchange policy,” he said.
The central bank has imposed capital controls on foreign currency and capped the official dollar rate just below 200 naira, resulting in shortages of currency and hitting investment as foreign firms expect Nigeria to devalue sooner or later – a move that Buhari has said he opposes.
On Wednesday, the government eased the controls by saying fuel importers would now be allowed to buy dollars on the unofficial market to help them purchase fuel.
On the parallel market, the naira weakened 1.25 percent on Thursday to 324 to the dollar. “People are holding on to their dollars in anticipation of an increase in demand for dollars by oil importers,” said Aminu Gwadabe, head of the exchange bureau operators’ association.
One senior banking official who declined to be named said there would be a meeting in the next few days between the central bank, which has sole responsibility for monetary policy, and market operators as the banks sought clarity on exchange rate policy following Osinbajo’s comments.
Despite being Africa’s biggest oil producer, Nigeria imports almost all its gasoline because its refineries have been neglected for years.