In May 2007, Nigeria had its first democratic transition. According to the President’s 7-Point Agenda, the government is committed to fighting corruption, improving security as well as sustaining and deepening political and economic reform.

Given its size and federal system (36 States and the Federal Capital Territory), Nigeria poses a special challenge for the Bank Group. The Bank believes that to ensure that there are positive results on the ground, there is a need for a strong partnership with the Nigerian authorities.

During the period 2004-2007, the Nigerian government sustained far-reaching economic reforms, especially in the areas of public finance management, governance, banking and financial reforms.

The country also saw significant improvements in overall economic indicators. Macro-economic stability was consolidated, with inflation dropping from 15 per cent to 5.3 per cent. Nigeria also had a robust GDP growth rate of 6.3 per cent, particularly in the non-oil sector.

However, key challenges must be tackled to help sustain the growth of the non-oil sector, harness the great potential for private sector development and accelerate progress on most of the Millennium Development Goal (MDG) indicators. It is recalled that 54 per cent of the people in Nigeria live in poverty.

Maintaining macroeconomic stability, while improving the environment for private sector activity, investing in social sectors and closing the huge infrastructure gap are crucial steps, particularly in power, transport, water supply and sanitation. There is also need to consolidate reforms at the state level and a stronger emphasis on broad-based economic growth, employment generation, and a significant reduction of poverty. Establishing more effective Donor Coordination Mechanisms is also crucial.

Bank Group Strategy for Nigeria

The Bank’s active portfolio in Nigeria in the  first quarter of 2008 comprised 16 operations of a commitment of UA 391 million. This includes two private sector lines of credit of UA 135 million. Disbursement in the first quarter of 2008 stood at 39 per cent. A total of 38 per cent of the portfolio was into infrastructure, 34 per cent in the social sector, and 28 per cent in agriculture.

Nigeria’s allocation under the Bank’s African Development Fund for 2008-2010 (ADF-XI0 is UA 198.30 million, a 40.7 per cent increase over the ADF-X allocation of UA 140.54.

The Bank’s strategy for Nigeria, outlined in its Country Strategy Paper (2005-2009) is centred on two main pillars, namely human capital development through intervention in the social sectors, and the stimulation of private sector-led growth in the non-oil sector through enhanced infrastructure, agricultural and rural development. The strategy involves both public and private sector lending as well as public-private partnerships (PPPs).

implementation of Bank-funded projects in Nigeria has often been slow. However, progress has recently been made in the completion and closing of ageing projects. The average completion period of projects on the portfolio from 2005 to 2007 declined from 5.4 to 3.6 years.

Meanwhile, the Bank continuously seeks to build strong partnerships on the ground to enhance the performance of its portfolio. The Bank is also determined to ensure the continual growth of its portfolio in the country.

As a ‘blend’ country, Nigeria is eligible for financing from both AfDB and its concessionary window,  the African Development Fund (ADF). However, the Nigerian Government’s policy is not to borrow on non-concessionary terms. Its public sector borrowings from the Bank have in recent years been restricted to only the ADF. The AfDB non-concessionary window has been used only for private sector operations. One  result has been a continued decline of the size of the Bank’s public sector portfolio in Nigeria. Yet, the implementation of the country development agenda will require a significant amount of investments, particularly in infrastructure. The Bank will continue to pursue a dialogue and work with the authorities in identifying sound Public-Private Partnership (PPP) operations which could benefit from AfDB financing instrument.

Working with other donors, the Bank will also enhance its institutional support and advisory work aimed at improving governance, the investment climate and growth poles at Nigeria’s federal state level.