Picnews
Anambra State Governor, Professor Charles Soludo, has explained the reasons behind his administration’s decision to withdraw the state from a World Bank-backed loan programme, stating that prevailing macroeconomic conditions at the time made the facility financially unfavourable despite its low interest rate.
Soludo disclosed this while speaking at the Delta State Economic and Investment Summit, where he explained that exchange rate uncertainties and distortions created significant financial risks, making the loan more expensive in practical terms.
According to the governor, the volatility in the foreign exchange market meant that even a zero-interest loan could translate into an effective cost of more than 100 per cent due to potential exchange rate adjustments.
He stressed that exchange rate stability remains a critical factor in attracting foreign investment and promoting sustainable economic growth at both national and subnational levels.
Soludo revealed that Anambra was the only state to withdraw from the World Bank-supported Nigeria COVID-19 Action Recovery and Economic Stimulus (NG-CARES) programme after his administration reviewed the implications of the prevailing exchange rate situation.
“When I became governor, I pulled Anambra State out of an ongoing World Bank loan, NG-CARES, and Anambra was the only state that pulled out. The macro fundamentals, the foreign exchange and exchange rate distortions were such that I told the World Bank that even at zero interest, it was still the most expensive fund in the world, given what I knew was going to happen with exchange rate realignment,” Soludo said.
Using an illustration of exchange rate movements, the governor explained that accessing funds at one exchange rate while anticipating significant currency depreciation could substantially increase the actual repayment burden.
He added that Nigeria’s macroeconomic environment has improved in recent times, noting that greater exchange rate stability would help strengthen investor confidence and encourage increased foreign capital inflows.
The governor also reiterated his administration’s commitment to a zero-borrowing policy, stating that Anambra had not obtained loans from commercial banks, the Federal Government or international financial institutions since he assumed office.
Although the Anambra State House of Assembly approved a N100 billion borrowing facility in 2022, the administration did not utilise the approval. The state government also dismissed reports in August 2024 that it was seeking a loan of between N245 billion and N247 billion to finance budget deficits, describing the claims as inaccurate.
Soludo has consistently maintained that his administration has executed infrastructure projects and human capital development programmes without relying on borrowing.
The governor further noted that Nigeria’s foreign exchange position had improved significantly, with net foreign exchange reserves rising from about $3 billion in 2023 to over $40 billion, while gross reserves increased to approximately $52 billion.
He argued that improved macroeconomic stability would enhance Nigeria’s ability to attract foreign investment and support long-term economic development.
Soludo had earlier expressed support for the economic reforms of President Bola Tinubu, describing them as necessary measures aimed at stabilising and repositioning the Nigerian economy.
He maintained that his backing of the reforms was based on their potential economic impact rather than political considerations, stressing that the objective was to place Nigeria on a sustainable path of growth and development.
