Buhari going to China in March for loan deals

Buhari going to China in March for loan deals

Wednesday, February 10, 2016 9:24 pm

President Buhari: has a China date in March

President Buhari: has a China date in March

President Muhammadu Buhari will be heading to China next month in search of soft loans to cushion Nigeria’s record budget deficit, it was learnt today.

To prepare  for the visit,  Finance Minister Kemi Adeosun will be heading in the same direction next week to negotiate  the terms for the loan. Nigeria needs  up to $2 billion from China and has shelved plans to raise $1billion  from  the Eurobond market.

One Nigerian government official told Reuters that any loan agreed during Adeosun’s trip could be signed by President Muhammadu Buhari in Beijing next month.

“The finance minister, in the company of the central bank governor, is scheduled to be in China sometime next week to conclude negotiations on the $2 billion loan,” said the official, who asked not to be named.

With China largely closed for the Lunar New Holiday, it is unclear how keen Beijing is on the idea, or how tough a bargain it might demand.

The official acknowledged negotiations had been underway for some time and that the terms had yet to be agreed. However, he added: “Hopefully it may be sorted out during this meeting and the loan will be signed during President Buhari’s visit to China in March this year.”

The central bank could not confirm whether Governor Godwin Emefiele would be joining Adeosun.

Nigeria wants to raise about $5 billion abroad to cover part of its 2016 budget deficit. This is projected to hit 3 trillion naira ($15 billion) due to heavy infrastructure spending at a time when the slump in global oil prices has slashed it export revenues.

Buhari, who was elected in March 2015 on a promise to fix the West African country, wants to turn around the economy by investing in power plants and transport, ending a development paralysis under his predecessor Goodluck Jonathan.

The president asked China in December to fund rail and power projects and Adeosun, who already visited Beijing last week, has raised the possibility of seeking a loan from the Export-Import Bank of China.

With world markets in turmoil, investors are wary of lending to anything but highly-rated  emerging economies.

Nigeria’s reluctance to devalue the naira , which has plunged on the black market, would further discourage investors, meaning the cost of commercial borrowing would be prohibitive.

That puts pressure on Africa’s biggest economy and top oil producer to borrow more from other sources such as China. Nigeria had up to now planned to raise around $4 billion at concessionary interest rates from sources such as the World Bank.

Adeosun has said Abuja has held “explanatory talks” with the World Bank. It has also asked the African Development Bank for a $1 billion budget support loan.

A World Bank loan would probably be tied to specific goals with strings attached. As well as infrastructure projects, Nigeria also wants loans to refinance existing debt, one financial source said – an idea that would be hard to sell to the World Bank or other development-focused lenders.

The World Bank has confirmed talks have been held on “Development Policy Operation” funding, which typically aims to improve infrastructure and create jobs. The multilateral lender has been studying projects to fight poverty in northern Nigeria, where the jihadist Boko Haram group is waging an insurgency.


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