Cheap Money Is Reducing Demand From Nigerian Firms for IFC Loans

(Bloomberg) -- The World Bank's International Finance Corp. is finding it isn't easy to compete with the cheap money on offer in Nigeria.

Companies in Africa's biggest economy are tapping support programs from the central bank and benefiting from lower interest rates to raise funds, unlike the past when multilateral lenders were the leading game in town to get loans below 10%.

The lender will probably raise less than the $1 billion it planned in 2017 to distribute to Nigerian companies that will help diversify the economy away from oil, Country Manager Eme Lore said by phone from Lagos, Nigeria's commercial hub. These would include industries such as financial services, power and downstream petroleum firms, she said.

“We still are working to raise local-currency financing, but the challenge for us is making sure that we have projects,” she said. “If we issue a bond, we will definitely find buyers, but we need to have more clarity on the demand side.”

The IFC four years ago sought permission from Nigerian regulators to issue bonds to provide funding. By the time it came, borrowing costs had soared. In the middle of 2020, however, government bond yields in Nigeria fell as excess liquidity flooded the market and the central bank injected 3.5 trillion naira ($9.1 billion) of stimulus to combat the fallout from the coronavirus pandemic.

The Washington-based institution is still keen to have a local currency program in Nigeria,” Lore said. It will probably do a local bond or private placement this year to support the targeted economic sectors, she said.

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