THE African Development Bank (AfDB) says it will only extend further help towards Nigeria’s recovering from its recession only if:
1. it increases taxes,
2. reduce interest rate
3. hands off periodic intervening on the interbank exchange market.
Speaking to the media in London Wednesday, the AfDB President and former Nigerian agriculture minister Akinwunmi Adesina, attributed most causes of Nigeria’s problem to include liquidity problem,
.“We (the AfDB) will rally strongly around the country to overcome its recession. We want to make sure Nigeria gets resilient again, but it must put certain things right.”
Nigeria had already counted on last month’s promise from the lender’s board of the bank that it would get a $1bn grant loan, at a rate of around 1.2 per cent, which Nigeria could use to jump start the 2016 budget, with a N2.2-trillion (about $7.5 bn) deficit.
But the bank is about to release a loan of $1.5 billion to Egypt, which applied after Nigeria, simply because it is said to have been in lead of reforms, said an insider of the bank.
To meet the conditions from the international financial bodies, the country had agreed on several reforms, such as increasing its value-added and corporation taxes to offset a loss of oil revenues.
But the African bank said, that the tax-to-GDP ratio of between 4% -5 % is still lower than between 12-15% in other countries in the region.
The condition is coming against the backdrop of anticipations that the bank would help in funding the 2016 budget stalled from implementation by lack of funds.
Nigeria has been trying for months to borrow abroad to fund its budget to get the economy back on track.
AfDB also condemned the current interacting investment policy of government, made worse by high interest rate when it is known that the economy in recession cannot be dragged out of it with rising interest rates.
Nigeria abandoned its currency peg in June hoping to attract more inflows, but few foreign investors have indicated interest to put their money back into its economy, as the need for hard currency has seen to a rise of over 70 per cent exchange loss of the naira.
In September the central bank left its benchmark rate at 14 per cent, resisting calls to lower borrowing costs.