The World Bank has released a $1.5bn loan to Nigeria following the Federal Government’s implementation of a few of its economic reforms, including removing fuel subsidies and introducing tax policies.
This was after the apex bank said it had approved two operations: $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing Program (DPF) and $750 million for the Nigeria Accelerating Resource Mobilization Reforms (ARMOR) Program-for-Results (PforR).
This combined $2.25 billion package provides immediate financial and technical support to Nigeria’s urgent efforts to stabilise the economy and scale up support to the poor and most economically at risk, according to a document released by the world’s apex bank.
The document dated June 13, 2024, said the loan further supports Nigeria’s ambitious, multi-year effort to raise non-oil revenues and safeguard oil revenues, promote fiscal sustainability and provide sufficient resources to deliver quality public services.
The $1.5bn loan disbursed to Nigeria was structured in two tranches with different maturity periods.
The first tranche was a $750m credit from the International Development Association, featuring a 12-year maturity and a six-year grace period.
The second tranche, a $750m loan from the International Bank for Reconstruction and Development, has a 24-year repayment period with an 11-year grace period.
The first tranche of $750m was disbursed on July 2, 2024, while the second tranche, tied to the fulfilment of specific economic reform conditions, was disbursed in November 2024.
The bank said that the RESET DPF is focused on supporting Nigeria to strengthen its economic policy framework by creating fiscal space and protecting the poor and economically insecure. The ARMOR PforR will support efforts to implement tax and excise reforms, strengthen tax revenue and customs administrations, and safeguard oil revenues.
The bank said, “Confronted with a fragile economic situation, Nigeria recognized the urgency of changing course and embarked on critical reforms to address economic distortions and strengthen the fiscal outlook. Initial critical steps to restore macroeconomic stability, boost revenues, and create the conditions to reignite growth and poverty reduction have been taken.
The World Bank commended the government for not only meeting the condition but exceeding expectations by fully deregulating the fuel market.
The document noted, “In terms of implementation, while the TRC [Tranche Release Conditions] formulation required introducing the change over a specified time-bound implementation period, the Borrower has moved ahead and made the change immediately, thereby overachieving the TRC in this respect.
“Effective October 2024, the price of PMS has been determined by the international market and the exchange rate set by the Central Bank of Nigeria.”
Commenting on the loan, the World Bank Vice President for Western and Central Africa, Ousmane Diagana said “Nigeria’s concerted efforts to implement far-reaching macro-fiscal reforms place it on a new path which can stabilize its economy and lift its people out of poverty. It is critical to sustain the reform momentum and continue to scale up and expand protection to the poor and economically at risk to cushion the effects of cost-of-living pressures on citizens.
“This financing package reinforces the World Bank’s strong partnership with Nigeria, and our support towards reinvigorating its economy and fast-tracking poverty reduction, which can serve as a beacon for Africa.”
