Washington D.C., USA, October 28, 2024—The International Finance Corporation (IFC), a World Bank Group entity, has signed a pivotal agreement with the Central Bank of Nigeria (CBN) to expand local currency financing in Nigeria. This partnership is designed to support private businesses across essential sectors such as agriculture, housing, infrastructure, energy, small and medium enterprises, and the creative and youth economy. The move aims to stimulate economic growth by allowing the IFC to increase its investments in Nigerian naira, thereby managing currency risks more effectively.
A Groundbreaking Initiative to Support Nigeria’s Economic Growth
The newly signed agreement between IFC and CBN represents a significant step toward scaling up investments in Nigerian naira across sectors deemed critical for economic stability and diversification. By providing local currency financing, IFC aims to address the unique financial needs of Nigerian businesses, particularly those unable to take on foreign currency debt due to exchange rate risks.
Central Bank Governor Yemi Cardoso highlighted the importance of this initiative, saying, “This pioneering initiative between the IFC and CBN will unlock much-needed long-term local currency financing for private businesses in Nigeria at economically viable rates.” Cardoso underscored the importance of moving beyond conventional intervention programs, describing the partnership as a transformative step in promoting Nigeria’s economic diversification agenda.
Key Benefits for the Nigerian Economy:
- Long-term Local Currency Financing: Reduces reliance on foreign currency loans, mitigating exchange rate volatility.
- Sector-Specific Investment: Focuses on agriculture, infrastructure, housing, energy, and more, directly benefiting areas critical to Nigeria’s growth.
- Support for Small Businesses: Offers affordable financing solutions for SMEs, fostering job creation and economic development.
For Nigerian businesses, this translates into more accessible and affordable financing options, enabling them to scale and innovate without the added risk of foreign currency exposure.
IFC’s Commitment to Nigeria’s Private Sector
With an existing investment portfolio of $2.13 billion in Nigeria—the second largest in Africa—IFC has long prioritized expanding local currency financing to meet the needs of emerging markets. This partnership marks a continuation of IFC’s strategy to foster economic stability in Nigeria, a country facing rapid urbanization and increasing demand for financial support in key sectors.
IFC’s Managing Director Makhtar Diop expressed optimism about the collaboration’s potential, emphasizing that the initiative is a crucial part of the IFC’s broader mission to drive sustainable economic growth in emerging markets. “Expanding access to affordable local currency financing for small businesses in Nigeria is essential for IFC to address the increasing demand for diverse funding options and to better manage currency risk,” said Diop.
In response to this demand, IFC has committed to deploying over $1 billion in financing across Nigeria’s critical sectors in the coming years. The focus on local currency financing will be key to enhancing economic resilience, providing businesses with a buffer against external economic shocks.
Addressing the Need for Local Currency Financing
Local currency financing is critical in emerging markets like Nigeria, where currency volatility poses a significant risk to businesses reliant on foreign loans. The IFC’s partnership with the CBN aims to alleviate these challenges, offering businesses the stability they need to expand and create jobs. Local financing, particularly in high-impact sectors, ensures that businesses are better equipped to manage operating costs and scale without fear of unpredictable exchange rate fluctuations.
The collaboration aligns with the CBN’s broader mandate to foster a stable financial system in Nigeria. By working with reputable international entities like the IFC, the CBN seeks to offer Nigerian businesses economically viable financial support, furthering its commitment to sustainable development and price stability.
Sectors Set to Benefit from the Partnership:
| Sector | Key Benefits |
|---|---|
| Agriculture | Increased access to financing for farmers and agri-businesses |
| Housing | Enhanced funding for affordable housing projects |
| Infrastructure | Support for long-term infrastructure development |
| Energy | Funding for renewable and sustainable energy projects |
| SMEs | Affordable loans tailored for small and medium enterprises |
IFC’s emphasis on local currency financing is a direct response to Nigeria’s economic needs, which include creating job opportunities, reducing poverty, and driving progress in sectors like housing, agriculture, and renewable energy.
Fostering Economic Diversification and Innovation
For Nigeria, a country rich in natural resources but heavily reliant on oil, economic diversification is a key policy goal. This partnership not only meets immediate financing needs but also supports the nation’s long-term economic agenda. Governor Cardoso highlighted the transformative potential of the IFC-CBN partnership, calling it a “catalyst for economic growth” that aligns with Nigeria’s development aspirations.
By channeling funds into a diverse range of sectors, the partnership promotes a more resilient economy. Initiatives like these are expected to have a lasting impact, fostering innovation, improving infrastructure, and empowering small businesses to contribute meaningfully to the national economy.
Expected Long-term Outcomes:
- Job Creation: Financing for SMEs and essential sectors will foster employment opportunities across the country.
- Economic Stability: Local currency financing shields businesses from exchange rate fluctuations.
- Innovation and Growth: Access to funds encourages businesses to innovate and expand, driving long-term economic growth.
This strategic focus on sustainable development aligns with IFC’s broader mission of creating markets and opportunities in developing countries. As an institution with an active presence in over 100 countries, IFC is uniquely positioned to bring global expertise and capital to Nigeria, reinforcing its role as a key partner in the country’s economic development.
The Role of IFC in Emerging Markets
As a member of the World Bank Group, IFC stands as the largest global development institution dedicated to the private sector in emerging markets. In the fiscal year 2024, the IFC committed a record-breaking $56 billion to private companies and financial institutions in developing countries. By leveraging private sector solutions and mobilizing private capital, IFC works towards creating sustainable economic opportunities in regions facing poverty and economic instability.
In Nigeria, this partnership with the CBN underscores IFC’s commitment to empowering local businesses, particularly those in high-growth sectors. The collaboration will enable IFC to utilize innovative financial instruments to address the unique challenges faced by Nigerian enterprises, ultimately contributing to a more vibrant and diversified economy.
